They say you shouldn’t have favourite clients, but we all do, and this business is one of my personal favourites.
We went in because the owners mum was the Financial Controller and it was felt by all that she was spending way too much time working in the business when she should have been winding down and enjoying herself. They had tried several times to recruit someone who could cover both the management of the bookkeeping (and actually do it when needed) to the level of particularity that the Financial Controller expected, as well as do the high level bits that would enable the business to move forward with better systems, processes and reporting. Cue FacePalm!
The business was making a healthy profit but the bank balance never seemed to go up and the business owner had no idea why and despite trying to get a report that would tell him the answer, had so far been unsuccessful. He was running on gut feel and had a fair idea on what was going on but was still unable to get answers to this burning question of his. The first thing we did to solve this conundrum, was to create a Cash-In, Cash-Out report, which showed exactly where the money was going over a 6 month period and showed with no ambiguity that they were buying too many new fixed assets. Strike One – we solved the mystery of the lack of correlation between profit and a rising bank balance (your fixed assets sit on your Balance Sheet, not your Profit or Loss!). Finally, the question was answered and we could now set about growing that bank balance! To do this the business owner needed a few things:
proper management information they could trust
a cashflow forecast
It only took a few weeks to set up these up. We used the management accounts pack to see how the business was performing as a whole and start thinking about ways of saving money. We could see what customers were buying which allowed us to think of where to put the right resources to increasing turnover. The cashflow forecast showed us what we expected the bank balance to be at different points in time, and we were able to use model scenarios based on different spending patterns, or income revenues. The budget gave vision to ensure the whole team was sticking to and working towards a common goal and allow us to monitor the progression against actual figures on a regular basis.
Within just 3 months the staff and owner were more aware of their spending, paid more attention to the value of what they were spending on and how it fit into the long term picture, and more importantly, the bank balance had increased by £50k (Update: £270k in 8 months). We are now in the process of considering clever ways to cut spending in certain areas of the organisation but not at the cost of value for money or efficiency.
The Financial Controller is now only in the office on average twice a month instead of 3 times a week and is feeling relaxed that her Finance Team is being managed properly – so much so that she’s been able to go on holiday 6 times in 6 months! She said she feels like she got her life back at long last, and that is what FacePalm is all about. That’s what we get up every day and do this for.