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?

Tuesday, September 23, 2008

Quality in the Numbers …

I recently had lunch with a long standing associate and good friend, Bob Westrip. Bob is a former banker and now works with businesses helping them to develop and become investor ready. Bob told me that one of the major banks was increasingly expecting it’s customers to have an annual external audit, regardless of the fact that it might be well below the £5.6m turnover threshold.

Under normal circumstances company law only forces a company to have an audit when its turnover reaches £5.6m.

This is I feel quite an interesting development, and perhaps reflects banks general concerns in the current climate about the risks associated with their lending. However, whilst it might tick a box as far as the bank is concerned, it is questionable if the business concerned really gets any value out of this quite expensive process.

A well managed business will have good quality, accurate and timely management information continuously. This is often monthly for management accounts, but should be daily or weekly for “commercial” statistics like order intake, order book, sales raised and perhaps other key performance indicators (“KPI’s”) relevant to the business. If this information is produced from a well run and managed system, and management use it, then this adds value to the business and builds a good foundation.

I say a well managed business, actually it probably goes further than that. If a business is to survive in the long term it simply must have these processes in place and the relevant and detailed management information to make decisions from. Otherwise you are simply working in a vacuum – and that leads to suffocation and certain death!

The alternative, of having a mediocre accounting system which is “checked” just once a year (and then some months after the date) by an external accountant who is not really overly familiar with the day to day running of the business is simply hopeless. However, this is where most businesses are, and arguably perhaps this recent move by the banks may force them further down this road.

When Insight Associates get involved with a business, the concept of a “year end” becomes much less significant. It is after all just another month. Yes, there may be a little more work to provide some additional analysis for the annual statutory accounts (which of course as a management tool are about as much help as a chocolate fire guard!), but other than that if the other 11 months of the year are done properly what is the big deal! The business needs good information, like I say, continuously, not just when the year end arrives, so every month must be “right”!

Having said all that there is great value in an external audit, and I feel from the businesses we get involved with that raising the threshold over recent years has actually done no one any favours. Most businesses do not have the benefit of “independent” eyes looking at their accounts on a regular basis (as they do of course when we are involved – but that is another story!!), and so things can “go wrong” without being noticed. There is much value in an external overview. However, the really important bit is to get it right all the time and have a good process in place that produces accurate results regularly.

Thursday, September 11, 2008

Cash, cash, cash ...

Cash is the very lifeblood of business, something which seems too often forgotten.

Time and time again you see talk of turnover or profits, and cash really not getting the attention it deserves. In the present market cash is becoming rather scarce, customers are paying later, and lenders are making new loans or overdrafts much more difficult to come by. So the focus must be on preserving your own cash flow at all costs.

I notice this week, that even our good friend Keith Steven at KSA Company Rescue is writing on his blog that they are having great difficulty being paid. KSA specialise in rescuing businesses in distress, mainly through the use of the Company Voluntary Arrangement (CVA) mechanism - indeed they are the countries leading experts on the CVA. Over many years we have worked very closely with KSA and have both saved many businesses through innovative solutions and good quality financial management. If their clients are having trouble paying them in order to save their businesses (despite not having to pay historical creditors) then it really does make you wonder what is happening with liquidity.

So, the message is simple. Focus on cash. Get your sales invoices out quickly, make sure you are only giving credit to people who can pay you (take a look here), and then ensure you get paid in a timely manner.

Cash really is king!

Tuesday, September 09, 2008

Don't be an Ostrich

There can be little doubt that a well managed business will constantly look forward and consider all of its options, others are likely to be doing a very good impersonation of an Ostrich with its head in the sand.

In these changing times being ahead of the game is key. Review all of those accepted assumptions and be tough in your expectations for the future. It is important to remain sceptical about the strength of trading conditions going forward, and be prepared for the possible outcomes, including the worst and unthinkable ones.

Businesses that do not follow this path, and either keep praying it will all be alright, or like the ostrich just hide until the danger passes, are significantly more fragile. Should the tide turn against them the possibilities of rescue are much more limited, be that through new funding or formal or informal insolvency routes.

So, make sure you are managing the cash harder, cut out the luxuries and excesses, and ensure you have a clear plan (or two or three!) that is likely to win the support of outside stakeholders should it be needed. Take a day out from your day to day routine and make a start.

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
Insight Associates is a trading name of Financial Catalysts Limited. Registered in England and Wales Number: 5670047. Registered Office as above. Disclaimer | Cookies