Insight Associates provide outsourced accounting and Finance Director services to ambitious and growing businesses. We work as your only resource or with existing staff to give you complete financial support including monthly management accounts, high level financial advice, robust controls and financial systems, funding and business planning, payroll & compliance, VAT returns and statutory compliance.

Successful business leaders have all the information they need to make good decisions…Do You?

Wednesday, October 19, 2016

With Your Budget, Think Like a Hypochondriac

We all know someone who’s always going to the doctor, worried about their health. They’re never truly ill and it seems like they never get sick.

I don’t think it’s a coincidence. Because they spend so much time obsessing about their health, they never miss a thing.

That’s why you need to check you business’s budget more often, too.

Many businesses never revisit their budget. They draw up a comprehensive set of figures, then put it away in a drawer for the next 12 months.

That’s a mistake.

When you set your budget, you are setting your goals and spending priorities for the year.

Inevitably, things will change – there will be unexpected expenses, the areas where you want to invest will shift, you’ll bring in more revenue than expected or there will be crises and emergencies.

That’s all natural and normal; Business is hard to predict.

But the budget you set months earlier is like a roadmap showing what you expected to be spending and bringing in.  It allows you to compare where you wanted to be with where you actually are.

If you find there’s a significant difference between your budget and reality, then you need to understand why that’s happening.

Think about how close you came to the budgeted figures, what adjustments need to be made, if any, and what changes should you make to improve performance.

It’s not a question of right or wrong, or good or bad.  It’s simply a way to help you understand more deeply what’s happening in your business, a benchmark to measure your performance.

I recommend you looking at your budget at the very least quarterly, preferably monthly, but this could vary depending on the nature of your business. Your budget should be an integral part of your monthly management accounts pack.

Is it highly volatile? How important is it that you stick to your budget closely? If you’re working to ensure your business can make loan repayments, for example, the risk of falling behind could be high. Depending on your needs you might need to look at it very regularly.

That’s no bad thing. Just like the hypochondriac whose obsession with health keeps them healthy, keeping a close eye on your financial figures will keep your business healthy, too.

You’ll get a deep understanding of what’s really going on – and never miss a thing.

If that’s a result you’d like to see let’s chat. The more insight you have into your own business, the more success you’ll see – and we’d love to help get you there.

Wednesday, October 12, 2016

How to Guarantee Your Budget Fails

Several years ago, an acquaintance of mine bought out the company he had been working for, together with four other managers.

To raise the capital they needed, they went all-in and re-mortgaged their houses.

It was an enormous personal risk, so why did they do it?

Because the company’s budget stated that the following year sales would rise rapidly, and they would quickly recoup their investment.

Unfortunately sales stuttered, and 18 months later the business was in trouble.

In this case, whoever drew up the budget (possibly one of those managers…..) was guilty of a classic and very common error. They had assumed a rise in sales, but the budget didn’t say how this was going to happen – what they had to do to achieve their goal, how much they would need to spend or where they would have to invest.

So it never happened…..

Your budget is worthless if the figures it is based upon are no more than wishful thinking.

To create an effective budget, you need to work differently.

Start with the question: “What do we want to achieve, and how much will it cost us to get there?”

So for example, if we want sales to rise by 20%, what do we need to have in place? Do we need to hire two more sales people? Buy a certain amount of equipment or give a particular department more funds?

The actions you need to take become your budget.

When that happens, the end point - that 20% rise in sales - is no longer an optimistic dream, but the natural consequence of your game-plan. And it becomes an entirely reasonable figure upon which to base your budget.

Don’t get me wrong: Optimism in business is great. It can sustain you through some of the darkest times your business will face and if there’s one thing for sure, you will face some dark times.

But when it comes to budgets, you don’t need optimism. You need realistic, concrete plans.

All the more so if the stakes are high – for example, if you’re re-mortgaging your house!

If you would like to formulate a useful, realistic budget for your business, please get in touch.

With a good budget, you are far more likely to see the growth you want.

Monday, October 10, 2016

The Real Reason to Budget (It's Not What You Think)

“Plans are nothing, planning is everything.”

That was General Eisenhower - and as the man who oversaw D-Day, he should know. Before the greatest invasion in history his army spent, quite literally, years working out what resources were necessary, consulting 125 million maps (yes, that is the real figure), developing transport arrangements, and training troops.

But although Eisenhower was speaking in a military capacity, his words are just as relevant to your business’s budget.

Too many businesses fail to give budgeting the care and attention it deserves, throwing together some optimistic figures and then promptly forgetting about them for the year.

I believe this happens because they don’t really understand why budgeting can be so useful.

As Eisenhower was aware, the true value isn’t necessarily in the budget itself but in the process of drawing it up.

Some of the plans he drew up for D-Day needed to be adjusted on the ground – indeed, he very nearly postponed D-Day because of bad weather.  Nevertheless, all those months and years he spent working out exactly what was necessary to win paid off, because the fundamentals were all in place.

He had the right troops, with the right equipment, and the right training.

Putting together a good budget is exactly like that. To really come up with meaningful numbers, you are forced to analyse your business in depth.

Why are you pouring resources into a certain area of your business? Are all these activities really necessary? What do you need in place to achieve your growth goals?  Are those growth goals even realistic?

Only then can you decide on what your final budget will be for the coming year, and how to allocate available funds.

Just like on D-Day, you’ll probably have to make adjustments to your budget almost as soon as the ink has dried (as Harold Macmillan put it, “Events, dear boy, events”…).

But by taking the time to assess every part of your business, you’ll develop a deeper understanding of what’s really going on, and be able to make better decisions even when circumstances change.

So, try not to think of creating and managing budgets as an unpleasant task. Instead, view it as an opportunity – one which could be key to the success of your entire enterprise.

Wednesday, September 14, 2016

The Hidden Cash In Your Own Business

All businesses need money to invest and grow, but finding it can often be tricky.
Take the example of “Brian”. His company was at a critical phase. He was taking on so many new customers, he needed to hire more staff and buy them new equipment. And yet, money was still tight. He didn’t have his profit margins right quite yet.

The banks were unwilling to lend him more money.

Yet with a little bit of hard work he managed to come up with thousands of pounds – all of it interest-free.

How did he do it? Well, he realised a simple truth. The money he needed was sitting right under his nose, locked up in his own business.

Like all businesses, Brian’s company had a huge amount of money tied up in things such as property, equipment and slow moving stock. It was just about knowing where to look and how to free up the money.

Start by taking a look at your own business. Where might that hidden cash be hiding?
Do you have any property which is unused? Brian realised he had a lot of spare office space, so he started renting it out – giving himself a much needed source of additional income.

He also needed to upgrade to new, more sophisticated, IT systems. He paid for part of this by selling off his older equipment. This gave him a timely boost which meant he could afford the much-needed investment.

Do you have any old stock which has not been sold or is moving slowly? Why not sell this at cost? It will free up some much-needed funds.

Get in touch with any debtors who are slow to pay. Most companies have these – it’s one of the leading causes of small business failure. So chase late payments more effectively.

You might also encourage other customers to pay up more promptly by incentivising prompt payment plans. Give them a discount for fast settlement of a bill. From a cash flow point of view, you may well prefer to have a bit less money today than a bit more money in a month’s time.

Speak to your suppliers and try to negotiate more favourable payment terms. If you are a regular customer, they may well be willing to give you more time – allowing you to do more with the money.

As long as they trust the money is coming in at some point – and it doesn’t impact their own cash-flow too much – they will probably be willing to offer some flexibility.

Shopping around can also be surprisingly lucrative. Many businesses are paying well over the odds for basic bills such as energy and business insurance. Don’t accept the price your existing suppliers are offering – there’s almost certainly a better deal elsewhere.

Kill waste. Every business has it. Examine all your processes and make certain they are as efficient as possible. If you can make multiple small savings across the scope of your business they will add up in time to something quite significant.

A more effective pricing structure can also unlock more profits. Businesses in the UK miss out on millions of pounds’ worth of extra profits because their products and services are priced too low. Work out if there’s any wriggle room and if you could get away with charging a little more.

The point is this: Almost every business has money to be found somewhere, whether its unsold stock, unused property, equipment or infrastructure. Examining your business can not only unearth some of these hidden cash pockets, but they can also help you refine your business operations.

We can help you take a look at your business and unlock some of that hidden cash. To find out how, hit ‘reply’ and let’s chat.

Wednesday, September 07, 2016

How to Raise Cash For Your Business Without a Loan

You’re looking to raise cash for your business, fast. Perhaps there is a piece of equipment you need to buy, or you want to open another office.

But the thought of taking out a bank loan makes you squirm.

A decade on from the 2008 crisis, banks are still making it difficult for small businesses to secure finance. You know that you’re going to have to jump through hoops with your bank manager. Somehow, visiting their office feels like visiting the headmaster as a child: Daunting.

You also know that bank loans are risky. What happens if you have a couple of bad months, and can’t make your repayments?

Business is stressful enough without having the threat of a loan default hanging over your head.

Then there’s the expense…. Those interest rates make your eyes water.
So what are your other options?
Luckily, you do have alternative sources of finance. Here are some you should consider, before taking out a bank loan:

Finance Lease or Hire Purchase: Do you need money to buy equipment? If so, a hire purchase arrangement might be the best option. This is in many ways a loan, but you’re borrowing the money from the company which sells you the equipment, rather than the bank. Your loan is tied to a specific product. And at the end of your payment term, you own it.

Many people take this option with a car, paying monthly instalments to the company until they own it outright. You can do the same thing with equipment.

The downside is that this can be more expensive over the longer term than buying it outright, but there’s less immediate impact on your cash flow.

Operating lease: This is a slight twist on leasing. At the end of the deal you give the equipment back. This is a good idea of you only want it for a short time, or it’s the kind of equipment which goes out of date quickly, such as IT. You can then organise a new operating lease agreement – it’s a cost-effective way to always have latest technology available.

With these deals you should always read the small-print carefully. What happens if your circumstances change? Do you have any flexibility to get out of the lease agreement? Never assume things will be alright – being stuck in an inflexible arrangement can be difficult.

Peer-to-peer lending: If the banks aren’t willing to lend, perhaps the crowd might do it. Peer-to-peer lending is growing, with companies such as Crowd Cube offering private individuals the chance to give loans to businesses.

Each business is given a credit rating based on the level of risk. This can be more affordable, but as with ‘regular’ business loans, you will still have to make interest payments.

Lending the money yourself: You might be able to invest your own cash in the business. If you decide to do this, you need to protect yourself in case things go wrong.

Set up the loan in much the same way as you would any other loan – that means taking security, arranging interest and a payment plan, just as any other lenders would do.

Friends and family might also be willing to help out with a loan. Again, set this up with all the professionalism and due process you would any other form of loan.  You need to protect them too.

All these have their pros and cons – the decision depends on the exact circumstances of your business. But there is another option: to find the cash hidden within your company.  Every company has some – I’ll tell you how to find it in my next Blog!

In the meanwhile, if you’re ambitious for your company but are not sure exactly how to finance its growth, let’s talk. We can help you organise your finances in the way that makes most sense.

Wednesday, August 31, 2016

Do I Really Need That Business Loan?

“William” owns a small company which runs hunting, climbing and fishing trips in Scotland.
It’s still early days, but so far things are going pretty well. The trouble is, his business is very seasonal and sometimes cash is tight.

What are his options?

Like many business owners, “William” assumes that he’ll have to take out a bank loan. After all, he knows his business will come back – he just needs the cash-flow to survive this difficult time.

But in reality, a bank loan wouldn’t be appropriate in this (fictional) scenario, nor would he get one.

A bank loan is something that every business owner should think about very carefully.

Yes, a loan provides much needed capital, but it also comes with risk and cost.

There’s the chance you might struggle to make repayments, and land your business in serious trouble.  Interest rates can be a drag on your business when the money does come in; your loan can end up being very expensive. There’s also the difficulty involved in securing a loan. They’re not given so easily nowadays, and it will take a lot of time and effort on your part to arrange.

Reality is that loans have weakened, or destroyed, many a business – and you should think long and hard before you take one.

So in what scenarios should you apply for a bank loan? And when might you be granted one?

Here are some key considerations:
  • Are your needs short- or long-term? Do you need the money for something which will have a long-term impact on your business – namely something which can help it grow and thrive?
    If so a loan might well be a good idea.
    However, if like “William” you only need it for the next few months to cover a short-term gap, it’s not worth the risk, nor will you want to pay the interest over the long-term. You’d be better off with an overdraft.
    The rule of thumb is: Get long-term funding for long-term needs, and short-term funding for short-term needs.
  • Are the costs justified? You must always make a business case for a loan, but the first person you must convince is yourself. You need to prove that you have a really good reason for taking on so much risk and paying so much interest. For example, let’s say you’re investing in equipment. Is the benefit it will give your business enough to justify the expense? If you can make the case to yourself, you’ll have a better chance of making the case to a lender – and getting a more favourable deal.
  • What if the worst happens? You know the old saying: Plan for the worst, hope for the best. What happens if – for some reason – you can’t pay it back? You’ll be asked for security or collateral – think about whether this is something you can afford to lose. Sometimes the lender will ask for the equipment you’re buying, but some people will make a personal guarantee against another asset such as their home. Think long and hard before you do this.
These are just three short questions to ask yourself before you make any further commitments. There are many alternatives to loans – and I’ll explore those in my next blog.

In the meanwhile, if you want your business to grow fast, but need help finding the money to do so, let’s talk. There may be plenty of options you’ve never even considered.

Wednesday, August 24, 2016

What Will Your Business Look Like When It’s Done?

Confession time.

When I established Insight Associates, now nearly 25 years ago, I had a pretty clear idea of what it was going to look like today.

I knew approximately how many employees I was going to have. I knew what turnover we were going to reach. I knew what my role was going to be, over two decades later.

Incredibly prescient?

Some kind of prophet?

Sadly not.

The boring truth is that I had a very particular vision of what kind of business I was going to build.

And then I went ahead and built it.

Insight Associates looks the way it does today not by accident, but by design.

And that’s how you should build your business, too.

It all boils down to a question you need to be asking right from the start: “What will my business look like when it’s finished?”

In my last blog I talked about the three life-stages of a business: Infancy, adolescence and maturity.

You need to decide at the outset which of these stages your company will be at when it’s “done”.

Do you want to be a small firm with just five or six employees in one office, or do you want to grow into a much larger £10m company with 50 employees, several branches and an international presence?

As the CEO, do you want to be hands-on, or to sit back and take a more strategic view? Are you starting a business because you want a comfortable income, or are you looking to create an organisation which can go on without you?

There’s no right or wrong answer, but if you don’t already have those answers, you need to think about them – fast.

You see, that will allow you to lay the foundations accordingly.

It’s like building a shed. You start off by putting small concrete foundations in place – that’s fine - but it’s no good then trying to build a skyscraper on top of it.

If you want a lifestyle business, you’ll be able to get away with simple systems and infrastructure. If you aim to build a much larger company, you’ll need to put in the right processes, technology and people from an early stage.

When it comes to the financial side of things, a bigger company needs more effective financial management. This means thinking about who’s doing your accounting, what kind of information they’re giving you, how useful it is, how you handle your invoicing, how you ensure your cash flow is smooth and so on, very early on.

If you want to become a big company, start acting like one!

So what will your business look like when it’s finished?

If you’re aiming for a business that grows well beyond £1-£2 million, we can help you put in place the financial management you need to get there.

Insight Associates, Insight House, Riverside Business Park, Stoney Common Road, Stansted Mountfitchet, Essex, CM24 8PL, UK
Tel: +44 (0)1279 647447 Fax: +44 (0)1279 814512
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