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, June 29, 2016

6 Signs You’ve Outgrown Your Accounting System

We were working with a husband-and-wife team whose business had recently reached a turnover of £2 million.

But all that business meant hard work, and lots of it. Every week, they would spend three full days ploughing through their accounts - themselves.

They had no free time, which was putting enormous stress on their relationship. They were drowning in paperwork. And they were constantly struggling with a job they shouldn’t have been doing, leading to mistakes and frayed tempers.
When I suggested that we could automate much of the process, the husband practically cried with relief.

“The accounts have been dragging our whole lives down, but somehow we’ve never managed to delegate them,” he said. “Getting rid of it would be an enormous burden off our backs.”
I asked them what they would do with an extra three days of time each week.

“Concentrate on business development,” they answered immediately. “We’ll be able to grow at a much faster speed.”
What they experienced is quite common amongst businesses that have recently hit the £1-£2 million mark.

In the early days of your business, it’s relatively easy to keep track of your finances. As the business owner, you might do this yourself, jotting down your income and expenses in Word or Excel. Or perhaps you worked with small bookkeepers who use simple accounting software or have built their own systems.  
But as you grow, there is a lot more data to keep track of and it all gets more complex.

The trouble is, your financial management systems don’t always grow in sync with the rest of your business.
I’ve seen so many companies whose workforce has rapidly expanded, that have doubled or tripled their client base and that have invested in new infrastructure such as offices and vehicles. Yet they handle their accounts exactly like they did when the owner worked out of their bedroom.

Here are some signs that you, too, have outgrown your financial systems:
  • Too much admin. Every financial task takes ages and there is so much paperwork! You’re doing things the longwinded way
  • Bookkeeping is always out-of-date because staff do not have time or capability to get it done on time
  • Your company has grown to several divisions, but your accounting reports still only shows one…
  • Too many short-cuts. For example, there’s just one line for “Expenses” rather than a meaningful breakdown of what kind of costs you are incurring. The information in your accounts isn’t useful to you.
  • Not accessible. Only one person has access to the software. Directors who need easy access to your accounts don’t have it.
  • You haven’t upgraded your accounts package in years. You’re using an old version which isn’t supported anymore and it keeps crashing. Or you have lots of systems which are simply not talking to one another.
If any of this strikes a chord, your finances are probably chaotic and stressful. Chances are, your accounts aren’t ready when they should be, they’re often wrong or incomplete, and they take up far too much of everyone’s time.

In fact, you’re lucky if there have been no major repercussions already, such as missing money that you are owed, terrible cashflow or suddenly facing a tax bill that is much larger than you expected.

To protect your company – and yourself – you need to upgrade the way you handle your accounts. Grown up companies need grown up systems.
In the meanwhile, if you feel that your company has grown to the point where you need to handle your finances more professionally let’s talk. We can help you put in place all the same financial processes and skills corporate companies have, so that you can run more smoothly, plan effectively and generate more profit

Monday, June 27, 2016

They Thought They Were Making a Loss But...

For years the company had been working with their own in-house bookkeeper, who had been doing all the accounts on his own system.

His management accounts didn’t quite ring true with the management – they felt that they were very careful with money - but they trusted their expert and so ran their company accordingly.

It was only when he left that the truth revealed itself. We came in, and discovered that the accountant had been getting his sums wrong. They were actually running a small profit.

What’s the moral of this story? Don’t take what your accountants say blindly.

There are a number of reasons why they might get things wrong.

A bookkeeper might not post all transactions; they might not be doing accruals and pre-payments; they might not be taking into account any depreciation of fixed assets or doing bank reconciliations – namely checking that the bank agrees with the company’s records.

If they are working on an older system which requires lots of manual data entry it’s possible to make mistakes which could throw accounts awry.

When you work with wrong information you can make some terrible decisions. If you’re thinking you’re running a loss when you’re not, you may be cutting unnecessarily, firing people, and spending inordinate amounts of time on problems that don’t exist. Even worse, imagine the consequences of thinking you’re profitable when you’re not!

The problem is that it’s tricky to know books are wrong unless you get them reviewed independently, especially if you don’t like numbers. But there are things you can do.

First, the most important question you must ask yourself is, is whoever’s doing our bookkeeping and accounts qualified to do them? Are the systems they work on every bit as good as they can be?

We’ve actually come across companies turning over close to a million pounds still sending out invoices in Word. Another company actually produced a handwritten profit and loss account.
Needless to say, they had been vastly under-estimating their losses because several account balances were left out of their figures. By the time we reached them, they were extremely financially distressed.

So if your accountant or bookkeeper are not using up-to-date, professional tools, it’s a warning sign.
Second, check for things which don’t quite seem right. As the CEO above found, the story coming from his accounts didn’t match his own experience of the business. If something seems off kilter, you need to trust your gut instinct and look into it.

Ask your bookkeeper how some of the numbers are made up. For example, if they say you are owed £50,000, ask them how they reached this figure. On one occasion, we found that one company on the list had gone bust, and another large invoice had been issued twice by mistake.

I’m a numbers guy, all about the data. But the truth is that bad data is worse than no data at all.

Garry Mumford is author of the free guide, The 5-Step Process To Get Your Customers to Pay on Time, Every Time. He is founder and Director of Insight Associates, which since 1992 has been providing owner managed businesses with the financial insight essential for development and growth.

Wednesday, June 08, 2016

4 Ways To Overcome Your Fear of Numbers

Your monthly management accounts land on your desk.

You know that you really should give it your full attention. But the thought of having to wade through those numbers makes your heart sink.

You put the document right at the top of your inbox, where you can’t possibly miss it.
“I’ll read it carefully this evening,” you promise yourself silently – just as you did last month, and the month before that. This time, though, you really mean it.

For a couple of days it sits on the pile, making you feel guilty every time you look in that direction.

Then, mercifully, it gradually gets covered up with newer documents. By the end of the week, it’s faded out of view. You’re off the hook…. For another month, at least.

If you ever feel that way about the numbers in your business, you’re not alone.

Time and time again I meet business owners who studiously avoid reading any of their financial reports.

When I ask about their accounts, they tell me, “I don’t handle those”.

They are often brilliant businesspeople. They’re “just not good with numbers”. The figures either hold no interest for them or seem tedious, especially if the business is growing nicely (as far as they can tell…..).

Often, they’re embarrassed and pressured because they don’t understand what the spreadsheet is telling them. It’s easier to leave it to others.

Sometimes it’s a fear of finding something that might worry them.

All of these are legitimate and understandable. The bottom line, though, is that ignoring your numbers is dangerous for your business.

 A CEO who doesn’t know what’s in his or her accounts is like a captain who’s frightened of looking out of the window. There might be a great big iceberg just waiting to smash their ship to oblivion – which they could avoid, if only they saw it in time - but how would they ever know?

If that describes you, here are four things your bookkeeper, accountant or team can do to make your financial reports easier to digest:

1. Present them visually. If you can’t make head or tail of the numbers, ask your accounting team to present them as a graph, pie chart or whatever form is appropriate. Many people absorb information quicker this way. 

2. Summarise. Ask for an executive summary of just a few key numbers, in a cover sheet. That way you get the information you really need without having to wade through figures that make your head spin. If you have any questions, you can always delve down into more detail.

3. Focus on what’s important. Think about three to four numbers that are problem areas for your business – and get special reports on those. Is cash an issue? Ask for regular updates on who owes you money. If margins are vital, make sure you have these.

4. Ask advice. You’ve hired your accountants for a reason. Mine their expertise. Ask them to explain the figures to you rather than just dumping them in your lap.

You don’t have to become a financial expert overnight (or at all….). But you must help yourself become familiar with at least the basic numbers in your business.

To do otherwise represents unacceptable risk. Ignorance can be bliss, but it can also be fatal.

And let’s be honest. Imagine that next month, your management accounts land on your desk. Instead of spending two days ducking the issue, you simply read a summary and get on with your day.

Wouldn’t that be a relief?

Garry Mumford is author of the free guide, The 5-Step Process To Get Your Customers to Pay on Time, Every Time. He is founder and Director of Insight Associates, which since 1992 has been providing owner managed businesses with the financial insight essential for development and growth.

Wednesday, June 01, 2016

Why Haven’t You Raised Your Prices?

2015 looked like a tough year for Coca Cola.

Health-conscious consumers were turning away from fizzy drinks. Add to that the downturn in the dollar, and it seemed likely that the company would take a painful hit.

So what did they do? They raised prices in North America by 4%.

The result? Within six months, a 20% rise in profits. 

Now, I know what you’re probably thinking.

“That’s all right for Coca Cola. They can do whatever they want – people are addicted to their products!

“If we raised our prices, sales would drop. If we want more business, it would be better to cut prices – not raise them.”

Luckily, that’s not true. In almost all cases, the number one thing you can do to increase profits is to put your prices up. Unlike other methods of increasing profits – cutting costs, selling more – it can be done quickly, and the results are immediate.

It’s important to remember that even very small price increases can result in large changes to your profitability (as in the Coca Cola example). How so? I don’t want to get bogged down in figures here, but think of it this way. 

Imagine you’re selling a product for £100, which costs you £80 to bring to market. Your profit is £20.

Increase your price to £105, and your profit margin per item will rise to £25. So, for a small price increase of 5%, your profits have grown by 25%.

You don’t even have to raise your prices by that much. According to research by McKinsey, even a 1% hike in prices can raise your profits by 11%.

Nor do you have to increase your prices across-the-board.  If, for example, you know which of your products or services are least profitable, you can restrict your price rises to them only. Or you could work out which clients are getting the best deals from you, and start charging them more.

The fear, of course, is that if you raise your prices, you will lose some of your customers.
And you’re right. That might happen.

But because you’re charging more, you can afford to lose some sales; you will probably still make more money than before. If you’re really lucky, you will even get rid of your problem customers, those who are squeezing you for every penny instead of making you richer.

Here’s another secret. If you offer stellar service, your best customers won’t mind if you charge them a little more. They’ll probably just wonder what took you so long……!

If that’s a result you’d like to see, but you’re not sure how much to raise your prices by, or which products and services are your least profitable then get in touch. I’d love to help you become more profitable.

Garry Mumford is author of the free guide, The 5-Step Process To Get Your Customers to Pay on Time, Every Time. He is founder and Director of Insight Associates, which since 1992 has been providing owner managed businesses with the financial insight essential for development and growth.

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