SPECIAL FOCUS - Integr8 Group

FINANCIALTightercontrolsboostprofitsIntegr8’sfinancial teamWORDS Iain ScottIntegr8 IT’s net pretax profit for the year to June 2008 is three times thatof the previous year, on turnover that is about 50 percent higher year onyear. The key to that success, says consultant Ray Schur, who manages thecompany’s finances, lies in regular reporting, tight control over expenditureand new business.Schur, a former financial director at retailer Woolworths, took The Integr8Group on as a client with the financial year beginning July 2007, and,together with the company’s directors and heads of divisions, transformedthe way that budgets were drawn up and managed. Among othermeasures, the corporatising of reporting and running the operation as ifit was a listed entity was introduced. “Every expense will be actual budgetvariance, and there has to be an explanation for every variance,” he says.“I don’t produce the accounts for every single company within thegroup. The accounts are prepared by the finance department and are sentto me for final review, comment and presentation to the board. I write tothe financial managers of all the companies with comment like, ‘What isthis?’, ‘I don’t understand this’, ‘check this’. That process could take quite awhile – up and down, up and down – but by the time I attend the monthlyexecutive committee meeting and I present finance, I have satisfied myselfthat this is the reason why budget was or wasn’t achieved, I table all thatand action is taken. That has made an unbelievable difference to thecompany,” Schur says.Improvements resulted in happy shareholdersThis control of expenditure and revenue has resulted in the markedimprovements in turnover and profit. Schur adds that turnover is increasingmonthly. “Each month sees a huge increase. Annuity-based line items aregoing up dramatically – they are signing on new clients all the time. Andin addition to all of those lovely things, control on expenditure isunbelievable now.”Schur says he discourages the inclusion of “nice-to-have” expenditurein the budget, and so at the executive meetings, the budget is debated indetail before a bottom line is agreed to. Everyone then signs.Schur says the executives are the ones who actually control theexpenditure. “I’m the guy asking the questions,” he says.Managing costsPerformance measurement is another area that has helped the companymanage its costs. Schur says it is common in the IT industry to want to hiremore people. “Whatever area you’re in, they’ve got ten people and they saythey need 11, or 12, or 13. Suddenly you start measuring performance, andyou say, ‘What capacity is the client deriving from the current personnel?’”The solution, he says, has been to allow skills and personnel only if that partof the business has delivered above budget.Schur says the company has not gone into overdraft since inception andthe balance sheet is strong, with no debt, which means the prevalent highinterest rates are not having an effect on the Integr8 Group. Debtors’ dayshave also been brought down significantly, from 120 days and 90 daysto 30 days.“That’s without writing off anything. There have not been bad debtwrite-offs at this stage,” says Schur. “So we’ve tightened up revenueand expenses. And this business is motoring – it really is. And what hashappened because of that, notwithstanding the control and being askedthe questions, everybody is very positive and very excited because they seethe bottom line. So it has been incredibly motivating.” BRay Schur, Chief Financial Officer“Each month there is asubstantial compoundedincrease.”22