Developing an Integrated Approach to Your Company Finance
FAIA, FFA, FIPA, CME
If you’re the owner of a growing business, then your accounting and finance systems need to support you and help you move your business forward.However, many business owners don’t receive this kind of support and may not even realise it until something goes wrong.
But you don’t have to fall into that trap…
In this special guide, Derek Williamson of Goddards Accountants introduces a fresh approach to business finance – one that will ensure you are able to act on your data in a way that results in serious, sustainable business growth.
Some of the topics covered include:
What data do you really need to understand the state of your business?
Why there is no such thing as a one-size-fits-all approach to business finance
Do you really need a full-time finance director?
How to cope with unexpected disasters, so your business will keep growing no matter what
This is a rare opportunity to benefit directly from Derek’s knowledge and experience – the result of years spent helping growing businesses regain control of their finances and achieve their full potential.Once you put his advice into practice, you are guaranteed to see a significant improvement in your business’ overall performance.
Far too many business owners pay the bare minimum amount of attention to their accounting and finances.Provided the annual accounts are done on time, they’re happy… until something goes wrong.Whether it’s an issue with cashflow, invoicing, VAT or company formation, there are few things more frustrating for a business owner than their business being derailed by a problem that could easily have been prevented had it been spotted and dealt with early on.
That’s why I wrote this guide.
The pages that follow are your introduction to the unique approach to finance and accounting that we have developed at Goddards Accountants over the years – one based on providing business owners with the data they need, when they need it, and also helping them make informed decisions on how to best act on it.Rather than simply compiling data, our focus is on translating it into serious, lasting business growth.
Some of the things you’re about to read may challenge the way you think about your finances and accounting, but I guarantee that once you put them into practice, you’ll see a dramatic improvement in your profits and efficiency, not to mention enjoying the peace of mind that comes from knowing you’re free to concentrate on building a better business.
How well do you really know your business?
It may seem like an odd question but it’s surprising how many business owners don’t really appreciate the metrics that drive their businesses, let alone how best to act on them.For example, if you have fifty different products available, how profitable is each of them?Is there an effective costing system in place?Are they equally viable and important?Will they stand the test of time, or do they have a limited shelf life?What are your overhead costs? Are they realistic?As the owner of a growing business, it is essential that you always have the data you need to answer those questions accessible to you and that you get the advice you need to effectively interpret it.
This is why the first thing we do with you when you become a client is conduct a full Business Health Check, where we gather all the data we need to create an objective, accurate picture of the state of your business.We’ll look in depth at what your business is doing, and why you are doing it, identifying where things could be done in a more cost-effective manner.Rather than simply telling you what you’ve done after you’ve done it, we want to identify and implement ways of making a serious difference to your business’ bottom line.
Note that this doesn’t just mean looking at the profit and loss – it’s also important to look at the actual cash flow implications.For example, if you are talking about giving everybody 90 days credit, but everyone that you’re dealing with is going to give you 30 days credit, how are you going to fund the difference of 60 days?Many businesses fail not because they’re insolvent, but because they haven’t got the cash available when they need it.Far too many business owners never consider this until they run into problems, at which point it becomes a matter of sitting down and talking with their bank manager, or possibly changing their terms in order to salvage the situation.
A common objection to the above scenario is that most customers will take 90 days to pay, so the system described is a perfectly logical one.However, although customers will certainly take 90 days to pay if you
allow them to, this needn’t be the case if you work out a proper credit control system.For example, you might send clients who are late with their payments a reminder on day 40 and a full legal letter on day 50. It’s all a question of being systematic.
Why there is no such thing as a ‘one-size-fits-all’ solution when it comes to business finances
Although there will naturally be certain elements that all businesses have in common, when it comes to developing a truly integrated approach to business finance, the differences between different businesses in different industries will need to be taken into consideration in order to identify the most effective solutions.At Goddards Accountants, this has been proven to us many times over, as we’ve worked with a wide variety of businesses in a wide variety of industries over the years.
For example, IFAs are generally primarily interested of staying up-to-date with their quarterly compliance in order to keep the FCA happy, so we can best help them by making sure their quarterly returns are handled properly.On the other hand, estate agents will be managing properties for landlords and paying bills on their behalf, so their primary concern is likely to be ensuring this process runs smoothly.In the case of restaurants and pubs, we generally work with them on their margins, to make sure they will be 100% protected in the event of a tax investigation.
Similarly, different industries will have different standard practices, which will affect the way they manage their finances.For example, cash virtually never changes hands in the publishing industry as everything is done on paper, while the construction industry is the exact opposite.
This level of personal attention is essential if our solutions are to prove effective in the long term.
What is forensic accountancy?
Forensic accountancy is a particular speciality for us.This is simply the practice of investigating and reporting on fraud cases in order to determine whether someone was or wasn’t deliberately fraudulent.The exact nature of our involvement in cases like this can vary.For example, in one recent case, we worked with a couple who admitted they had defrauded the DWP (although the judge admitted he would have found them not guilty if they hadn’t).However, our investigations subsequently found that the DWP had broken the law and had acted fraudulently by denying them benefits they were in fact owed.As a result, although our clients were found technically guilty, they were only fined a penny and all costs were awarded against the DWP.On another occasion, we were involved in a case where someone was suing their accountant for incompetence.Our role was to determine once and for all whether the Accountant was actually at fault or whether their former employer had simply failed to heed their advice (regrettably, the Accountant was at fault).
As a neutral third party in situations like this, we are often able to ensure situations do become worse than they have to be and can be resolved in as fair a manner as possible.
Your first meeting with us
With the wide range of services we offer and the number of different factors to consider when integrating and optimising the different aspects of a business’ finances, it’s important that we’re able to get to know you and your business properly in order to determine which services you will require.
During our first meeting with you, we’ll discuss who is doing what within your business and to what extent.Do you have a full-time bookkeeper?If so, how good is their work and how much information are they getting?This last question is especially important – it’s amazing how many times we find that the information needed to drive business growth is already available, yet no-one within the company is actually looking at it!As members of the “added Value Network” (AVN) we have specialist software to help provide the key data.
Many businesses only look at their accounts once a year, when their accountant prepares them, but in my experience, this is a mistake.I would advise you to look closely at your accounts every month (every quarter at the very least), otherwise you could be losing money without even realising it.We can support you in this regard and look for ways to save money in the monthly figures.For example, let’s say you made £100,000 profit during your first nine months, on which you would have to pay £20,000 corporation tax.Once this has been identified, you’ll have two months to do something about the tax implications.It’s only possible to make savings like this if you start thinking about your taxes well in advance rather than waiting until after you’ve received a large bill in the mail.If you know what your next tax bill is likely to be, it gives us a chance to put some tax planning in place in order to minimise you liability.
But what if you already have an in-house bookkeeper?
Many growing companies will already have a dedicated bookkeeper who is responsible for their payroll and possibly other aspects of their finances.However, real-time payroll is very demanding and time-consuming to manage, especially as companies get bigger, so it’s not uncommon for bookkeepers to reach the point where they ask their employers to outsource the company payroll, as it is starting to have a negative effect on other aspects of their work. Furthermore, the bookkeeper won’t necessarily have any control over how the business’ staff act on their data (indeed, in many cases the data just sits in a folder until the time comes for the annual accounts!).
Are you a seasonal business?Does it flow throughout the year and if so, is there a trend?Is your turnover down?Are your margins down or up?These are the sort of things that you should be looking at every month.
We analyse this with a growing number of firms.We want to be with these companies working on their figures on a daily or monthly basis rather than waiting until the end of each year. Experience has taught us that this is the only way to translate data into serious business growth.In addition, we will actually advise you on how to interpret and act on your data using our AVN software, as there’s no guarantee that you’ll always have someone within your organisation who possesses the necessary knowledge and experience for this.
Take VAT for example: when businesses have bad debts, they often just write them off, despite the fact that they could easily claim the VAT back on them!Similarly, many businesses don’t take the time to reconcile their banks, but if you make a habit of this, how will you keep track of your cheques in the event one or more of them aren’t banked?If, for instance, you have five cheques currently out, yet not all the money has disappeared from your account, you need to know
exactly which cheques still need to be banked, how much they are worth and how old they are.You need to make sure that what your book says actually matches up with the reality of what’s sitting on your accounts at any given time.
We can also help you with things like contracts of employment for your entire staff and your insurance in order to ensure you will be properly covered in the event of the worst.We will look at these as a matter of course for all our clients, no matter the nature of their businesses.This ensures that if problems do arise in the future, you don’t get trapped in a cycle of blame in the rush to find out who is at fault.For example, if we discover that your business is worth £750,000, but you are only covered for £500,000, we will let you know, so you can come to a new arrangement with your insurance company rather than have them refuse payment due to underinsurance.
The long-term benefits will more than justify this extra level of attention.
What services are right for my business?
This all depends on the level of input you feel you need from us.For instance, our most basic package will involve us taking care of your taxes and accounts preparation, whether you are a sole trader, partnership, LLP or limited company, to which we might add payroll or consultancy services.
The amount of input you’ll require from us is likely to depend on your annual turnover.For example, if you’re a relatively small company at his point in time, it could well be that you’ll just need us to come in once a month, collect and process your data, and add it to
your cloud system that we manage for you, so it’s accessible to everyone within your organisation.What most clients in this position tend to prefer is to handle their sales invoices and bank receipts themselves, while we take care of the rest, although as we’ve said, it’s all a question of what suits you.
When your company has achieved an annual turnover of more than half a million pounds, it’s probably time to consider getting your own in-house bookkeeper.At this point, although you should still keep looking at the monthly data, as we discussed earlier, you should also consider looking at other aspects of the business, such as the management accounts.At this point, it will probably be necessary for us to conduct a regular review of the business and undertake more in-depth work, such as preparing the annual statutory accounts and corporation tax work.
The advantage of a totally bespoke service, such as the one offered by Goddards, is that it can grow with your business.After all, the purpose of integrating the different aspects of your finances like this is to grow your business, so it’s natural that the services we provide for you will need to evolve in tandem.
You don’t need to handle your company formation on your own
At Goddards Accountants, a big part of how we help businesses involves company formation. Many business owners assume they can handle this on their own, underestimating how many factors will need to be considered, or the timescales involved.Fortunately, as we have a direct line to all our clients, we can actually be arranging your company formation, handling everything from the appointment of directors to making sure shares have been allotted.We can even open a business bank account for you!
It’s simply an extra level of convenience and peace of mind for you, allowing you to concentrate on growing your business, safe in the knowledge that it won’t be derailed by trivial mistakes during the early stages.
How we can help you cope with an unexpected disaster
Of course, even with the best planning and preparation, disaster can sometimes strike. However, if your business is hit by unexpected problems, we will support you to ensure the situation stays under control and any long-term damage is minimised.
We’ll begin by going over your papers to identify exactly why you are in trouble.Is it something that you have done, or is it something that your former accountants are responsible for, for instance?Based on this, we will look for ways to minimise any tax liabilities that occur.
Another common problem faced by businesses is VAT investigations.When these are initiated by HMRC, it is usually because someone within the business has misunderstood their responsibilities with regard to VAT, claiming VAT on everything when it is not necessarily applicable to all their purchases.Situations like this can easily be avoided if you regularly review your business’ accounts and engage the services of professionals who can advise you on specialist subjects like VAT.
Don’t assume that you and your staff will necessarily possess the skills and experience to handle every single aspect of your business’ finances, no matter how capable you are at what you do.It’s far too easy to leave yourself liable this way, especially if you aren’t yet conducting regular reviews of your accounts. The resulting peace of mind will more than justify the extra time and effort.Remember that
as a Director, Partner or Sole Trader, you could be personally liable for fines, etc.
In fact, we will work with you to create a disaster recovery plan, so you have both preventative measures and control measures in place, including a proper backup system, then test them to ensure they will prove effective and have been properly implemented. Although you will hopefully never need it, it will make all the difference if something does go seriously wrong.
When is the right time to hire a full-time finance director?
Many business owners like the idea of a full-time finance director but can’t afford it. However, if you are currently in this position, you may still be able to enjoy some of the benefits of a finance director’s services.
Many growing companies do not actually need a full-time finance director and could happily gain similar benefits by simply engaging the services of a part-time finance director once a month to conduct a review of the management accounts.This represents a considerable saving, yet can still prove invaluable to the business.
You may eventually reach the point where a full-time finance director would be a sensible option.This point will largely depend on your margin, the number of staff you employ and the nature of your industry.For example, one business may need a full-time finance director once they reach a turnover of a quarter of a million pounds, while another may been turning over five million, but still not need one.
Having an objective pair of eyes look at your business can be a great help when it comes to deciding whether a full-time or part-time finance director is right for you.If you’re unsure, we will always be happy to set out the advantages and disadvantages for you when we review your business.
The problem with hiring multiple firms to take care of your finances
I’m often asked why businesses can’t just hire someone to take care of their payroll, someone to take care of their taxes and so on, in order to benefit from as many specialists’ skills as possible.Although this may seem like a good idea, in practice it rarely works well. When we engage with businesses for the first time and start looking for where things are currently going wrong for them, we often find that they have multiple professionals working for them, yet channels of communication between them are virtually non-existent and no-one has taken responsibility for co-ordinating their work.
As a result, it becomes much harder to identify the real cause of problems, as nobody is clear on what everyone else is doing, or how their own work fits into the big picture. This often means that people start blaming each other for problems within the business rather than looking at what they need to do to fix them, so progress becomes difficult to achieve. It’s far better to have one firm take responsibility for your business’ finances, co-ordinating their own team and any specialists who need to be brought onboard.This way, everyone involved will be held accountable for their performance and the chances of miscommunication will be minimised.
I hope this guide has provided you with a fresh perspective on your business’ finances and accounting and that you are now ready to take a closer look at the way you do things.
In closing, let me just remind you to make reviewing your data and considering the long-term implications part of your daily business life, getting whatever specialist advice you need.If you do, you’ll make all your business decisions from a position of knowledge rather than relying on guesswork and assumptions and will be able to deal with problems before they even occur.
And that means you’ll be free to concentrate on what you do best… growing your business!
About Goddards Accountants
At Goddards Accountants, we specialise in designing, testing and implementing financial and accounting systems that help businesses become more efficient, more profitable and fully capable of handling any changes that occur in the future.
Our range of services covers tax, payroll, accountancy, disaster recovery, company formation and much more – all fully integrated and tailored to suit your business by our team of experts, so you’ll enjoy all the benefits of your own finance manager, without the resulting expenses.
In addition, we can now offer Cloud Computing using either QuickBooks or Xero and Receipt Bank to enable you to do as much or as little accounting as you wish, yet be able to get key management information every week.
Having worked with a wide variety of businesses in a wide variety of industries over the years, we provide a completely bespoke service that gets to the heart of your business issues and evolves with your company as it grows.
Just visit our website to find out more about how we can help you.We look forward to working with you!
For further information about Goddards Accountants, please call us at our offices:
102 Acre Lane
High Wycombe Office
c/o Franklin James
Axis 40, Oxford Road,
109 Church Street
8 High Street
Tel: 020 8941 2187