cashflow forecast Archives

What value does an FD add – and why you don’t need one

This gives your business the best of both worlds – the senior financial input you need but without a full-time cost. It’s a solution that an FD would be proud of!

What value does an FD add to any business?

Broadly, there are four things a good FD adds to any business:

1. Financial information

No business can last for long without solid, consistent, up to date performance information that looks at:

P&L, compared with budget, last year, forecast
Margins
Debtors
Cashflow forecast
Client & product / service profitability

2. Financial controls and processes

Mostly, these are routines that happen every day, week or month and need to work like a well-oiled machine:

Solid bookkeeping that’s right, first-time
Frequent bank reconciliations
Robust credit control
Intelligent cost control

Without these processes and systems working well, the financial information required simply won’t be produced in a useful way.

3. Getting other areas of your business to be aware of financial issues and constraints

Ensuring that everyone in the business is aware of the financial dimensions of their job, particularly when making decisions.

4. Being involved in occasional and one-off decisions and projects

Investing in new assets, buying / selling businesses, promoting or recruiting senior staff, lease renewal. These are some of the issues that pop up from time to time and require experienced financial input. But they don’t arise every day.

All of this is important, so why don’t I need an FD?

The tasks listed above are either routine, day-to-day or monthly tasks or they’re occasional issues that pop up rarely. The routine tasks can be dealt with by good bookkeeping and accounting staff, or they can be outsourced.

The occasional issues are exactly that and don’t need an expensive, permanent presence to deal with them.

If not an FD, then what’s the alternative?

A far better answer for most businesses is to enlist the help of people like Blue Dot Consulting to act as a part-time FD to:

put in place the financial processes and controls you need
train and coach existing staff to do a more demanding job
ensure the right information, bespoke to your business (not the standard reports that you currently get from your accounting system), is coming out to those who can act on it
maintain an ongoing presence in the businesses to ensure that everything continues to run as normal
pitch in to the occasional decisions as and when required

This gives your business the best of both worlds – the senior financial input you need but without a full-time cost.

It’s a solution that an FD would be proud of!

Call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk and let’s have a free-of-charge chat about your business.

Michael

You can’t run a £1m business and only have your bookkeeping updated every three months!

Part time Finance Director

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

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

Part time finance director

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

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

Monthly management accounts – five steps to useful numbers

none of these steps will be very effective if you don’t have the people or the accounting software in your business to produce the information you need when you need it, so make sure that you have these basics right and seek help if you don’t.

Monthly management accounts are essential for every business.

Quite simply, you need to know how you are performing and you need to know what to change or do more of in order to perform better.

Why monthly management accounts are a good idea

Management accounts, ideally produced monthly, tell you how your company is performing. For the month, the financial year to date, against budget, against last year.

Armed with this information and, ideally, other non-financial information, a management team can get the business to perform better by doing more of what works and less of what doesn’t. Things like:

controlling costs
improving margins
boosting cashflow
reducing risk through better credit management

Sounds useful? Here are five steps to help you get useful numbers that will make a difference.

1. Monthly management accounts & five-day deadline

Produce your management accounts, using a format that everyone understands, within five working days of the month end.

They should contain no surprises (do you really not know how your business is performing throughout the month?) and your top team need to discuss the numbers, absorb the messages and take action.

2. Profit & Loss information

You need profit & loss information for the month, year-to-date and compared against your budget and against last year.

Variances from budget and last year need to be understood and explained.

You also need information on gross profit margins, ideally by customer and by product / service.

Finally, there is a risk of being too focused on the present. Try to include some longer-term analyses such as moving average and last twelve months performance data. These smooth the peaks and troughs and give you a good sense of the trends in performance.

3. Cashflow and debtors

A profitable business can still go bust if it hasn’t got the cash to pay the bills.

Also, it’s a huge pain to run a business with a poor cashflow when it always feels as if you haven’t got enough money in the bank.

So include cashflow and debtor information in your management accounts pack and hold people’s feet to the fire to make them accountable for this part of your business performance (not just financial people – sales people have a big part to play in credit management!).

4. A picture paints a thousand words

An MD of a client of ours simply does not understand pages of numbers and he’s not alone. Therefore, include graphs and charts to tell the story in a different way.

Graphs often make a point more strikingly than numbers and are particularly useful for portraying a longer-term story and showing the forward-looking trends.

5. Calls to action

There simply is no point in producing management accounts that are not acted upon, so include calls to action and make sure that at the meeting where performance is discussed there is an agenda item that follows up on last month so you know action really is being taken.

Finally, none of these steps will be very effective if you don’t have the people or the accounting software in your business to produce the information you need when you need it, so make sure that you have these basics right and seek help if you don’t.

Can we help your business with management accounts?

We help all of our business clients with management accounts and we do a lot of work in Finance Transformation.

Can we help you?

Often, we find that a business is using a cloud-based accounting service, which would be fine for producing management accounts, if only they knew how to use the software better.

We also find businesses that are drowning in spreadsheets, sometimes because that’s how they have evolved and sometimes because they haven’t got to grips with their accounting software.

See if either of these blogs sounds familiar:

So, if you think we can help you, let’s have a free-of-charge chat about your business.

Call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk

Michael – @bluedotmichael

Related links:

Management information

Proof of profit

What are management accounts and do you need a makeover?

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

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