Tag: accounting

Know your numbers, don’t get lost in the fog

The technology doesn’t change the essentials and there is a real danger that businesses can get so caught up in the “how”, the graphs and the apps that they forget the real point of why they want the numbers in the first place.

There’s a lot of marketing noise about how rapidly technology is changing the way accounting gets done.

We know. We’re completely in the cloud and it makes a big difference to our clients and us.

But the technology doesn’t change the essentials and there is a real danger that businesses can get so caught up in the “how”, the graphs and the apps that they forget the real point of why they want the numbers in the first place.

Too many businesses are lost in the fog.

Five financial essentials

If you’re running a business can you answer these five questions?

  1. How is your business performing?
  2. How could it perform better?
  3. Who owes you money?
  4. Who do you owe money to?
  5. What is your cashflow like?

You need reliable answers to these questions to be readily available.

If you don’t have them then something needs to change.

Accounting software

It might be a software issue – we still see sizeable businesses running their accounts in spreadsheets.

Get some proper accounting software – there’s a lot of it about!

It might be a software issue – you’ve bought the software, they said it was easy to use, just like riding a bike, but actually no-one in your company knows how to use it properly.

Get some training!

Accountants

You might have accounting staff or a freelance bookkeeper, it’s quite likely you have an external accountant. But you’re still lost in the fog!

Change the people – improve them or lose them!

An MD’s cry from the heart

We’re working with an MD. She has a decent business, two or three staff, happy clients, made it through some difficult times and wants to kick on. She rang me because she doesn’t have reliable numbers and doesn’t know what to do.

In her case the bookkeeping has been poor and the accountants (gold medalists at non-responding) have barely shown up to make things right.

At least in this case the MD knew she was lost in the fog; we fixed it for her and gave her the clarity and peace of mind she was looking for.

How about you?

Let the fog clear – give me a call on 020 7125 0270

Michael

Related links:

Management information

Is my accounting any good?

Set up an accounts calendar for your business

How do you fill the gap between the books and the board?

You can create bad practices that embed themselves like fossils at the heart of the business and continue to be corrosive for a long time to come.

In many businesses there is a gap between the day-to-day bookkeeping and the information the management team needs to understand, measure and improve performance.

The gap might be created for good reasons but the bigger the company gets and the faster it grows – the more this gap will act as a drag on profits.

A familiar accounting problem

Firstly, as a business gets going the cost of accounting may be something to be minimised. Often a part-time bookkeeper or the MD or a family member will do the work, hopefully using a recognised accounting package.

This is fine – if it’s done right.

When it’s not done right, when processes are set up that are not very efficient, you can create bad practices that embed themselves like fossils at the heart of the business and continue to be corrosive for a long time to come.

No-one questions how things are being done because that’s how they’ve always been done!

Fast forward a couple of years and the business needs to know how it’s performing in a more sophisticated way – monthly management accounts, profit centres, job costing, budgets and cashflow forecasting, for example.

Who knows how to do these things, let alone that they may need to be done at all?

If the gap is not closed at this point then profits will be hit, often despite strong sales growth, and it will cost more to rectify the situation later on.

A sensible solution

Our solution is based around the idea that very few companies need a full-time finance director.

What they need is an occasional dose of experienced financial management to keep them on track as they grow.

To begin with, this might require an intensive period of hands-on help:

  • improving and streamlining processes
  • improving (or even introducing) the right level of management accounts
  • minimising risks through better credit control and cashflow management
  • training current staff to do a more accomplished job

Phase two is when the accounting is being done on automatic pilot. This is much more of an advisory phase

  • reviewing performance
  • contributing to one-off issues – annual budget, overseas subsidiary etc.
  • working with the management team to ensure targets are hit and sustainable growth is achieved

The business continues to evolve successfully, confident that it has strong financial management and that the board is getting the financial information that it needs to run the business.

But it controls its costs because it doesn’t create a full-time role for a part-time job.

Michael

Related links:

We’re a small business, I do all the bookkeeping – I just need someone to keep us on the right track

Part time finance director

Profits, cashflow and getting paid – the more things change, the more they stay the same!

© Blue Dot Consulting Limited

Chartered Accountants – Bedford House, Fulham Green, London, SW6 3JW

Is my accounting any good?

Towards the end of this burst of activity the accounting processes should be working on “autopilot” and everyone can concentrate again on delivering the profit and achieving growth potential of the business.

Accounting is so important to your business that you literally can’t afford to be getting it wrong, particularly as you grow. But if you’re not an accountant, how would you know if your accounting is right?

The focus here is on the accounting that’s going on every day, week, month during your financial year. If this is accurate and up to date then year-end accounts and tax planning should be as easy as falling off a log (so make sure your accountant is not charging silly money when you’ve done most of the work!).

But if the day-to-day accounting work is not being done correctly you can be in trouble and not know about it until it’s too late.

Symptoms of your accounting work being done badly might include:

  • late / no / incorrect management accounts
  • persistent cashflow problems
  • PAYE / VAT not being paid
  • suppliers forever hassling to be paid
  • customers taking ages to pay and not being chased

Of course, these could also be the symptoms of a badly run business with a finance team that’s on a hiding to nothing!

But let’s assume that yours is a well-run, profitable business with good growth prospects. If you’re seeing these symptoms then it’s likely that you’re being let down by whoever is doing your accounting work.

And that is something you need to change – fast!

What does the world of better accounting look like?

When we work with MDs to improve the quality of their business accounting it’s amazing how much anxiety and stress disappears pretty quickly. Particularly by focusing on improving cashflow and gross profit.

Often this type of work involves a short but intensive period of:

  • bringing the bookkeeping and management accounts right up to date
  • getting credit management working right through the business
  • looking at “pricing for profit“
  • cost control
  • improving processes and systems

Towards the end of this burst of activity the accounting processes should be working on “autopilot” and everyone can concentrate again on delivering the profit and achieving growth potential of the business.

Sounds like a good place to be?

Thought so.

Michael – @bluedotmichael

Related links:

Bookkeeping for your business

Management accounts – are yours fit for purpose?

Set up an accounts calendar

There’s often no such thing as a full-time Finance Director role

Once your accounting and finance procedures are running on “automatic pilot” there’s no need for an expensive FD. So the trick is to get to the automatic pilot position and only bring in extra experience when you need it.

In large companies, with large finance teams, there will be a full-time Finance Director role, but most companies aren’t that big. If you run a smaller business, this is how you can fill the finance director space. Continue reading “There’s often no such thing as a full-time Finance Director role”

I can’t run a payroll on my own because I don’t know what I’m doing

And most importantly, unlesss you run a payroll bureau, running a payroll is NOT the best use of your time!

I can’t run a payroll on my own because I don’t know what I’m doing.

So says a director of an SME business that we work with.

And she has a good point.

Where possible, outsource the tasks that others can do better, the ones that take a disproportionate amount of your time and sap a disproportionate amount of your energy and patience.

 

Why outsource payroll?

Payroll requires bespoke software, detailed knowledge of laws and regulations, systematic workflows.

One-off events need to be coped with – maternity / paternity leave, new starters, leavers – and you don’t want to get it wrong because you can upset your colleagues very easily.

But most importantly – unless your run a payroll bureau – IT’S NOT THE BEST USE OF YOUR TIME!

 

Why outsource anything?

Payroll is a good example, but there are many others. SEO, bookkeeping, HR, for example.

They all follow the same sort of decision process:

  • does the business need the task in question?
  • can we do it well enough in-house?
  • is it the best use of our time?
  • can we afford to do it / can we afford not to do it?

All of which is very functional. But don’t overlook a wonderful benefit of a job well-done – peace of mind.

 

Running a profitable business is tough enough and has many moving parts.

Stick to the tasks that you do best, most likely the ones you enjoy most, and bring in other people for everything else.

 

Related posts:

Is my accounting any good?

Part-time finance director – could be just what you need

Five tips to improve your sales invoicing

If you are being paid on credit terms then sending the URL instead of the invoice is simply creating a reason for your invoice not to be paid.

Sales invoicing is vital whatever you are selling: you have to get your invoices out to customers in good time or face ongoing cashflow difficulties that could make you go bust. Continue reading “Five tips to improve your sales invoicing”