What do your Accounts look like?

"Do My Accounts...Oh No!"...it is surprising the negative reaction just the thought of them can generate.

But, when you put all your imaginative ideas together, add the targets and assemble the separate costs, you need some way of evaluating what it will all look like in terms of PROFITABILITY.

So developing a budget which details your financial targets for the duration of your Business plan is a key step. Only by having a comprehensive look at the financial outcomes can you really see if what you are planning to do makes sense!

But it is so easy to be overwhelmed by financial planning and control. Let me give you a couple of examples...

1.The Ostrich effect
One of my clients couldn’t understand why she was loss making when the business concept was great, she always seemed busy and had no problems getting payments.

But she had no grasp of what her finances looked like - only the hope that it would eventually come good.

When I did a very quick analysis it showed that she was selling below the costs of operation. What that meant was that she needed to:

Sell more or,
Increase her prices or,
Cut her costs!

The information was available to allow her to take decisions, but she didn’t know how to collate or interpret it. Sadly, she is not alone.

2. Blind Man's Bluff
Another client didn’t produce monthly management accounts so had no “vision” of how the business was progressing. Their credit control suffered a similar malaise...with the inevitable result that a client defaulted on a large payment which of course hurt the business.

Accounts Managing your cashflow is critical to all businesses, but particularly smaller ones i.e. making sure that what you are receiving in payments does not exceed what you are paying out in purchases.

By planning your finances, month by month for the first year of your plan and annually thereafter, you will be able to structure and carefully manage your cashflow.

A "Good" Accountant

It is worth finding a good accountant...there are lot's of highly professional people to choose from, all who are keen to get your business.

Whether you intend to lean on them heavily and ultimately employ an Accountant or just outsource the preparation of your financial summary, it's well worth taking time to choose well.

So how do you choose?

Well, my TOP TIPS would be:

Check that they are qualified and a member of a nationally recognised professional body
Look to see if they have a website that you can review
Are they conveniently located and will they come to you?

What services do they offer and at what charge?
(In the UK, preparation and submission of financial accounts will vary depending how large and complicated your business is. So for a small, limited company expect to pay about £400, but a company with a turnover of £750,000 may be charged £3,000).

BUT most importantly: Wizard

Do you like and trust what you see?
Will they work with you to help build your business?
Do they have empathy with you and will not charge excessive fees?
Will they offer you the opportunity to speak to oneof their existing customers to see what they think about the service they are currently being provided?

There is a million miles difference between a competent Book keeper and a Strategically focussed Accountant. Either may service you very well, but I would always recommend the latter!!

Why?

In my view, a "good" Accountant is one that will work with you to nurture you through key financial decisions which are linked to the strategy you have drawn up for the company. They will act as a valuable voice of reason. BUT make sure that their conservative and careful views don't smother your entreprenurial spirit!

Keeping it SIMPLE!

I am an advocate of keeping things simple. And to try and explain the intricacies of financial management is way too complex.

However, for your Business Plan you need to build up a reasonably accurate financial picture. This can be done quite simply.

Start by creating a simple tally of your costs as follows:

Fixed Costs

Professional Fees (Legal, Accounting etc)
Bank charges
Insurance
Rent
Loan repayments
Electricity, Water, Local Rates
Telephone Rental
Printing & Stationery
Employee Costs
Marketing
Depreciation
Miscellaneous

Variable Costs

Employees (relating to production)
Raw Materials
Packaging
Distribution
Miscellaneous

The detail of your list may vary, but the principle remains the same. Once you have the yearly totals, for the first year of your plan you can break it down into particular months e.g.:

To refelect when the annual pay increase will be made.
Reflect a point in time when a large purchase may be made.
Detail when a step up in production capability and costs occurs to meet a sales drive.
...etc, etc

"The Bottom Line" - Achieving Profit!

A "snapshot" of monthly profit can be quickly determined by recording your monthly outgoings and comparing it to your expected sales.

There may be period where your costs are higher than your sales revenue. This allows you to rethink when your costs should be incurred and if they can be postponed. Or perhaps you can finance the gap through an authorised overdraft?

Either way, your Financial Strategy will reflect the decisions you are taking throughout your business and re-affirms why it is so important to plan what you do.

If you want further help and support to ensure you generate success, please follow this link to Contact Us or call 0845 408 5978

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