client profitability 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

Client profitability analysis – make more money from every sale you make

Profitable sales are more important than sales per se.

Running a client profitability analysis, at least every quarter, will highlight which of your client contracts are making the profit they should be.

And which are not!

Many businesses will focus on sales as the key driver for success, but anyone can make a sale if the price is low enough. Profitable sales are more important than any sales.

It sounds weird and it’s a brave thing to do, but if some of your clients are costing you money and you can not renegotiate the deal, you might be better off without them. I bet you’ve thought of a couple already!

Client profitability analysis

1. Find the poor performers

Firstly you need to know which clients are the loss-makers. Do you have the information to make an informed decision?

Gut-feel is not good enough. Your management information systems need to tell you the answer in an objective way. Which probably means some manner of time recording if you’re selling services.

But don’t forget to add in softer measurements such as the number of new business referrals you get from the client. Lower margins from a regular referrer could be a price worth paying and a way of saying thank you.

2. Take action

Once you know the loss-makers, ask yourself whether you can change the price you charge or the service you deliver in order to make them sufficiently profitable. Your client profitability analysis has more than paid for itself if you can achieve this.

Having identified the loss-making clients, you need to contact them and give them the news. Nicely! Agree a notice period and perhaps try to offer them an alternative supplier in their area.

You’ll now have spare resources to be deployed on more profitable business.

3. Use what you learnt in your next fee proposal

Client profitability varies over a period of time so conduct this review quarterly or half-yearly rather than culling a potentially profitable relationship because of one bad month.

Finally, take what you learn about profitability and margins and bake it in to your pitches and proposals for new work, otherwise you create a conveyor belt of low profit clients simply washing through your business!

What are you waiting for – go lose some clients today!!

Do you have the financial information necessary to carry out a client profitability analysis?

Many businesses we work with lack important information through a combination of poor bookkeeping and not using their accounting software to produce the right financial reports.

If this sounds a bit like your business then call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk and let’s have a free-of-charge chat to see if we can help.

Michael

Clients – are they profitable and will I be paid in good time?

There’s no point having a client contract which either doesn’t make money or doesn’t pay you in good time. This doesn’t just apply to potential new business deals; it applies across your entire client base.

There is no point having a client who either doesn’t make you money or pays you too slowly. This advice applies across your entire client base, not just to the next new business deal.

Tag: client profitability