The Position Today
Kevin is a 35-year-old electrician who has built a strong reputation for his company doing domestic work in his local area. We work closely with his wife, Tracey, who handles the books and we are currently engaged to provide services relating to the ‘end of year routine’, including annual accounts, tax and VAT returns, on which we are usually able to save them some money. We also attend and provide bespoke reports for a yearly performance review meeting at which we discuss, in a general way, their figures for the previous year, and plans for the next.
Kevin graduated from his modern apprenticeship 15 years ago and immediately set up as a sole trader. His turnover in the first year was £25,000 and he was happy to grow slowly to begin with. Tracey initially managed the bookkeeping side using a spreadsheet, which, after 6 years of steady increase in business volume, became too much for her to manage. They asked us for help and we introduced them to ‘Wave’, a free cloud-based accounting system, which made reconciliation much easier. In year 7 we oversaw the process of incorporation with Companies House and, as Kevin began to outsource some of the work to contractors and employ other tradespeople to complete jobs on his behalf, we helped Tracey to get to grips with the Construction Industry Scheme (CIS), P11Ds and P11D(b), the IR35. To assist them with this we have recently helped them to implement the ‘MoneySoft’ payroll management system.
Kevin wants to come offsite and take on a supervisory role, coordinating large-scale projects. Tracey wants to move away from bookkeeping and towards marketing, sales and customer service. They aim to maximise profit by attracting more business and outsourcing the work. We are currently supporting this process by taking over the bookkeeping from Tracey to free up her time, and we will shortly help them to implement ReceiptBank as a means of getting the data quickly into their ledger.
As the company grows and the number and complexity of jobs increases, we will introduce Xero, providing better integration with other software. WorkflowMax, a workflow plugin that allows them to track and coordinate every aspect of a job and accurately cost each section, will be useful here. The plan is to improve costing, deliver more accurate quotes and achieve better cashflow through effective booking and purchase ordering. We can also implement a limited benchmarking operation, comparing their processes with industry leaders.
Price: Compliance, planning and review
The Position Today
Claire is the director of Artisan Direct, dealing in unique pieces of handmade furniture online and from a shop in her local high street. She employs her own Xero-qualified bookkeeper, Trevor, who completes VAT, payroll and monthly management reports. We meet him twice yearly and offer additional advice on specific issues as required. We make all year-end returns and submissions, and complete final reports and projections too, analysing and presenting these at the company’s quarterly review meetings, offering comparison with projected data and adjustment of those projections where appropriate.
The company is performing well with a good turnover of stock and excellent cashflow, but Claire is only able to pay herself £22,000 a year. She lacks the capital to invest in larger volumes of stock and has to invest too much time selecting pieces that will sell quickly.
Claire has been with us only 6 months. She previously paid another accountant £900 a year for basic services, which suited her whilst she established her business on the high street. Having identified a huge opportunity in expanding online, Claire approached us for insight and support. Since then we have been getting to grips with the finances, which are already in excellent shape, and the business model. Our main activities have been around helping Claire to position the company for growth by identifying and selecting KPIs and establishing solid data collection streams. One key aspect of this has been migrating from Sage, the previous accountancy package that Trevor was using, to Xero, which was felt to be more versatile for a company of this size.
Claire’s principle aims are to increase the amount of company revenue that she can draw down as salary, and reduce the pressure on her to sell items quickly. This requires the generation of capital to finance the holding of more stock and the negotiation of credit lines and/or sale-or-return arrangements with her suppliers. Our first task will be to prepare a range of cases to present to suppliers around these proposals.
As the company enters the growth-phase, the performance review meetings will switch to a monthly period. We will provide strategic advice and mentor-ship outside these meetings, including discussions around allocating a budget for online marketing. Utilising the flexible data collection strategies we have already implemented, we will introduce online inventory management through TradeGecko, fully integrated with Xero.
Price: Outsourced, off-site accounts department
The Position Today
The Pot Sauce Food Co. is a patent-holding food production company specialising in ready-to-use sauces. We act as their off-site accounts department, handling everything from bookkeeping to payroll and all annual and monthly submissions through Sage 100, which links to their manufacturing software. We produce bespoke management accounts, presenting them at monthly performance review meetings, and provide in-depth cost accounting as well as annual budgets and projections. There is a fluid business plan, which we help to review quarterly. With our partners, Froya, we also provide monthly maintenance for their IT and communications infrastructure; currently 2 servers, 11 PCs and a 15-line telephone network (an additional £500 per month).
After an initial investment of family money, The Pot Sauce Food Co. grew from scratch on the back of their award-winning smoked apple chutney. We joined them 4 years ago when they were still operating as a sole-trader and supported them through the process of incorporation and diversification as they launched their current range of products. In the early years, the owner’s sister, Sarah, a trainee accountant, provided all their bookkeeping through the sage system. We supported her, handled the end-of-year submissions and, after the first 2 years, produced reports for quarterly performance review meetings.
After she became qualified, Sarah left the company to work abroad and we took over the bookkeeping. The fee we charged for this (£17,000 a year) was substantially less than the £24,000 salary that Sarah had drawn down. As the company grew, we worked with Froya to introduce dashboards for monitoring of the manufacturing process and key financial indicators on a minute-to-minute basis.
Having been granted a patent for a new method of heat-treating their jars, the company is expecting record margins and has enlisted the help of our chartered tax advisers to provide taxation planning. The patent is set to become one of their most valuable assets and we will assist the directors in preparing a case to pitch to new investors, capitalising on the cost-savings it provides. Further capital will be generated through R&D tax credit applications, based on the innovative nature of their process development.
The aim is to upsize and move to new premises, further diversifying into a range of high-quality microwave ready-meals, and increasing production. Smith & Brown will begin to take on a Financial Directorship role, working with the board to identify new means of improving production, identifying new KPIs and, based on those results, producing a new set of bespoke monthly reports.
Accounting Systems Set-up
Price: Outsourced accounts department & FD services
The Position Today
Everest Care Homes offers residential care for 105 elderly people across 3 sites. We act as an autonomous financial director, reporting to the board on a weekly, monthly, quarterly and annual basis in a strategic role, often concerned with competitor analysis. It’s a large operation with a payroll of 118 personnel, which we manage offsite as well as handling all the bookkeeping and compliance-related accountancy.
KPIs in this sector are bed occupancy, fees and staffing costs. One of our main responsibilities is the development of budgets and systems for staff costing to balance fluctuating demand. We use dashboard monitoring and alert systems to keep track of real-time information. With our partners Froya, we also implement and maintain the IT and Communications infrastructure for the company.
We have worked with Everest for 2 years. They began life with a single 15 bed home 9 years ago and have grown organically since then, initially extending their property to accommodate 30 more beds before acquiring 2 new sites.
Originally, they commissioned accountancy and financial directorship from a large city centre firm but terminated their contract because they had “no real interaction” with the company, despite paying high fees. Since taking over, we have forged a strong relationship with the board, assisting in the design and implementation of a bespoke purchase ordering system, an occupancy monitoring system and a custom workflow management application that handles care-planning, risk assessment and reporting. Because of the importance of staffing costs in this sector, we have also been deeply involved with the HR department, responsible for the recruitment, training and support of the current HR Manager, as well as overseeing the development of systems for staff training and recruitment.
The company is positioned for growth and we will take a central role in decision making, providing detailed analysis of, and planning for, all options; from acquisition or merger to self-build. If external finance is necessary for this operation, we will examine the options, producing detailed reports about the likely outcome in various scenarios.
Bed occupancy is currently 94% and, if this can be maintained as the company grows to a further 30 or 40 beds, it’s likely that next year we will cross the audit threshold. Much of our time next year, therefore, will be spent in preparing the company finances for handover to an auditor.
Disaster Recovery Systems
Price: Part-time NXD services
The Position Today
Laughing Tree Media offer traditional and digital marketing to a wide range of clients locally and nationwide. They employ an in-house accountancy team that handles everything from bookkeeping and end of year submissions to projections and competitor analysis. They retain our services as a financial director with responsibility for managing the accounts team externally, checking the bookkeeping each month, providing specialist reports, problem-solving, strategic advice, risk assessment and financial policy. This allows them access to the specialist skills of a financial director at a fraction of the cost of employing one full-time.
We have worked with Laughing Tree Media for the last 6 years. Founder Director, Marcus, set up the company from his bedroom 8 years ago, whilst still at university, and quickly attracted more business than he could handle whilst keeping control of the accounts. With the recent boom in digital marketing, the business has gone from strength to strength and they have moved rapidly through our services, initially requiring us only for end of year, then for all bookkeeping and monthly reporting services, until two years ago we took on a full financial directorship role.
As the company has grown further, it has been profitable for the board to bring back many of the basic accountancy functions in-house and we have taken a step back, helping initially to recruit and train the existing accounts team before taking on our current, more strategic role.
Further growth is on the cards as the board plans to diversify by acquiring one or more media startups with different skill sets in film, animation and voice-over. We will take a central role in planning the acquisition, analysing proposals from companies of different types, and providing financial and non-financial strategic information about the market and likely compatibility with their own operation.
A strong acquisition deal is likely to take Laughing Tree over the audit threshold, and through the next year we will work with the accounts team to prepare the company’s financial information for handover to a firm of auditors. Because of the strong relationship we have built with them over the years, the Laughing Tree wishes to retain our management accountancy services even after the financial directorship has been handed over.