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, April 19, 2016

Strangulating Side Effects

Everyone knows a tourniquet around the neck really isn’t a sensible suggestion to stop a head wound from bleeding!

In fact we’d go as far as saying it’s a ridiculous suggestion…

…yes it might stop the bleeding but the strangulating side effect is, I would suggest, something most patients are unwilling to accept!

Why then is the Department of Health asking accountancy firms to review the way NHS Trusts report their finances? And why are NHS directors being put under pressure to be less prudent in their forecasting?

The Daily Telegraph reported that briefing documents suggest that trusts will be asked to review 19 specific areas such as reclassifying assets so they are kept off the balance sheet, or extending their asset lives so they can be valued more highly.

These suggestions, like the tourniquet around the neck, are dangerous.

It pushes problems into the next financial year rather than solving them and is definitely viewed as a ‘fiddle’.

Figures from NHS regulators show that the deficit for the first three quarters of the year is already £2.26bn – which is triple that for the whole of the previous year.

There are several key things we can learn from this example…
  • Don’t bury your head in the sand or change your reporting to make the figures fit your forecast. If you’re going to do that what’s the point of forecasting in the first place? You’re just kidding yourself and setting yourself up for failure ahead.
    If something doesn’t add up, investigate what happened and put measures in place to correct it. However painful that may be!
  • Keep control of the costs. It doesn’t matter how large the organisation is, if you instill a cost competitive culture at every level it will avoid unnecessary waste.
  • It’s vital to have a robust and accurate accounting structure set up from the outset. If you don’t have the skills in-house to do this use a professional outsourced service who will account for everything correctly.
  • If your organisation is leaking money put measures in place as quickly as possible to stem the flow while still allowing you to operate effectively. Leave it too long and there may be nothing left to salvage but if controls are too tight you run the risk of strangling your business. You need to find a good balance.
 If you want help on any of this just drop us a line.

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