Steven Mugglestone

The more I learn, the less I know

Posts Tagged ‘business turnaround

Business Turnaround, a Dark Art or Common Sense and a Proper Business Plan

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More than half of Britain’s small businesses collapse because of cash-flow problems. The UK Insolvency Service sites 65 common reasons why businesses fail.  Many advisers and “experts” publish lists of a number of reasons, seven being a common number, unlucky for the failed business, with clearly a prize and first place going to the Insolvency Service at 65, clearly retired exhausted after then.

We like to keep things simple as this helps us and our clients, but we believe that the success of a business (and therefore the failure of a business) is down to one area (ok, poetic license as it is a related area), cash flow problems due to the lack of a real plan and system of control (i.e. the area that an experienced business orientated FD is good at).

Looking at seven common reasons why businesses fail, it points to the same cause and solution:

  • Business started for the wrong reasons and to try and make money quickly (lack of a real plan and system of control)
  • Poor management and lack of management (lack of a real plan and system of control)
  • Lack of capital (lack of a real plan and system of control)
  • Poor location and marketing (lack of a real plan and system of control)
  • Lack of planning (lack of a real plan and system of control)
  • Over-expansion (lack of a real plan and system of control)
  • No website (lack of a real plan and system of control)

No apologies for labelling the point but all FDs would say the same thing, lack of cash caused by a lack of a real plan and system of control and improvement.  Other recent articles that we have read with interest now refer to zombie businesses and that pretty much sums it up, a re-animated corpse, with no mind of its own; no control of its own; in fact control lies with others; never learning and never changing. In fact a favourite observation of ours is the common lesson for most areas of human behaviour; “If you do the same thing that you have always done, you will always get the same result.”  This is as important to businesses as anything else.  In fact in business, if you do the same thing that you have always done, it is likely that the future results will be worse than before.  We do recognise that many also say; “If it’s not broke then don’t fix it,” but this is also ignoring both normal wear and tear and inevitable depreciation.

Speaking to and working with people who have experienced or been a part of a business failure (and those of us that have seen, have worked with and have been a part of successful turnarounds), there are a range of views and emotions, noting the lack of support from interested parties such as banks, other lenders and major creditors, but in the vast majority of these, there is a common issue, lack of a real plan, lack of innovation and change, lack of a system of control which leads to a cash flow crisis.  In fact the references to lack of support from the bank, when explored further, usually uncover a situation where the business has pretty much lost control to the bank or lender.  There are also a significant and scary number of businesses which only produce annual statutory accounts, find out that they have made a loss, months after the year end; face another issue, such as loss of a major customer or restricted key supply and then tell the bank all the bad news at the same time, asking for funding/overdraft extension, with no solutions being offered by them.  They lack any plan in respect of the relationship, communication and information being given to their bank and are confused and angry when the bank then either refuse the extension or worse still, reduce or remove the overdraft facility completely.  We are not going to comment on the issues surrounding banking over the last two years or so, as this is well documented, but we are aiming to concentrate on how businesses can and should take matters in their own hands and control.

As we are still in what can only be described as challenging and uncertain times for businesses, there are now many who describe themselves as turnaround specialists and look to help to ensure that your business starts on a road to recovery.

I will now make a sweeping generalisation and observation, but in my opinion, there appears to be broadly three types of turnaround specialists;

  • Investors and their advisers who are looking to save the business but also to take advantage of the vulnerable position of the business, to take part or majority ownership of the business for considerably less than normal market value, this is harsh but to be expected;
  • Insolvency experts acting as expert advisers (but usually only looking to support the lending bank).  The reports that they produce and advice that they give can be very biased for not only the lenders positions, but for them to win the future work from the lender, quite a lot of business people recognise this with the analogy of putting Count Dracula in charge of the blood bank and emergency blood supply;
  • There are, however, other experienced advisers who have been there, done that and have the necessary skills and desire to help the business turnaround and be successful.

Going back to the title of the blog, despite the mystery and myth of business turnaround specialists, it is not a dark art.  Businesses are successful because they have a good product; a real plan; a system of control and improvement and control of their cash, businesses fail because they may have a good product but they do not have a real robust plan; have no real system of control and improvement and they do not have control of their cash.  Businesses achieve a successful turnaround because they eventually recognise the position that they find themselves in and take the appropriate action and introduce a real and robust plan; a system of control and improvement, no matter how simple, and control of their cash, before it is too late.

In some overtrading situations, where the businesses are growing rapidly, control can be lost as they did not believe that they needed it.  The sales and money keeps rolling in.  In many situations, we have seen the business hit a wall, when either an unexpected cost arrives (usually the tax bill, but if you do not have a real plan then anything could be unexpected) or when they face a supply problem.  We have seen many situations where a business has one main source of supply for a key component, product or service and when this supplier cannot provide the volume or specification required (or has gone out of business themselves); this has the knock on effect to our business.  This may fall under risk management, but it is common sense management that many businesses fail to address until it comes along to hurt them.  Having one supplier for a key area can prove fatal, indeed one key supplier sometimes can wield too much power over the business anyway.

As any successful and experienced FD would also tell you, a real plan is not only about one area, and it is common-place that the FD is the architect of the plan and its delivery; it is about ensuring that all parts of the business have a plan and the ability to deliver the plan and this has to include;

  • Recognition of where you stand, your strengths and your failings, what are your opportunities and what needs to be protected;
  • A good product/service combined with a marketing plan to deliver the appropriate sales;
  • A good knowledge of key supply and a good supply plan and agreements;
  • An operational and delivery plan, recognising and controlling key drivers in the business;
  • Appropriate recognition of your team development, management and leadership;
  • A budget which includes the key performance indicators relevant to the business;
  • An appropriate financial plan recognising the requirements for long term investment and finance as well as working capital management and short term cash flow;

Recognising the above and how an experienced FD can help and yes that includes the creative marketing stuff as well, when a business is facing financial difficulty it is cash that has to be the key priority and when we start to help this has to be the first area to control.  Sometimes, however, a formal insolvency route of administration or receivership will be required to allow the business to be put back on track, but sometimes a common sense plan will enable a business to right itself without the need for a formal insolvency process.

Some of the areas that a turnaround strategy and plan will include will be:

  • A thirteen week rolling cash-flow dealing with immediate and short term cash flow issues, identifying and managing the pressure points.  It is still remarkable the number of businesses that do not have a short term rolling cash flow plan.
  • A cash plan, breaking down what cash has to be collected weekly from debtors and how; what are the priority of creditor payments and then more formalised revised repayment schedules agreed with key suppliers.
  • A detailed recognition of short and medium term cash requirements and following a draft cash plan, engaging with banks and other sources of credit and lending to bridge the shortfall.
  • Recognition of the break-even position of the business and translation of that into a simple and understandable plan (i.e. the number of sales required a week or the number of conversions needed or jobs needed to be completed every week).
  • Following the break-even review, a plan for staffing requirements with the current and future work.
  • A marketing and sales pipeline made into a simple and realistic plan of hot leads and conversions to sales.  Who are they, where are we with the contract progression (which also recognises the price and profits for the contract) and control of this sales lead flow and reporting.
  • A rolling 13 week marketing and sales plan, what is coming in for the next three months and what marketing initiatives are being put in place for week 13 and onwards.  Having worked in retail this is a very useful, practical and vital plan that addresses every week the initiatives being put in place for week 13.
  • A profit improvement plan, reviewing all key supply and support contracts and where necessary going back out to the market for competitive tenders.  Again the real benefits will be obtained from having a full and detailed understanding of what it is you need and use, volumes, product requirements and when required, to be able to fully specify the tender and obtain realistic tender proposals.
  • A medium and long term plan of what the business needs to develop, following on from recognition of the business strengths, what are the real unique selling points that the business offers and how these areas should be further exploited for the benefit of the business.

We are not saying that business turnarounds are easy or can always be done with a positive outcome in every situation.  Sometimes the business has left the position too long or the market in which they trade has shifted significantly and the business has not changed to reflect that.  In many situations, however, businesses that are failing or are hitting a rough time can be helped and turned around by practical and common sense measures.  The business owner, however, needs to recognise the issue, take a step back and consider what is happening.  Many times the businesses are just doing the same thing over and over again (very zombie like) and with only their fingers crossed expect to see improvements and things change.  This will not happen in the majority of times and a more measured and practical critique and plan will be required.

I think it is fair to say that not all accountants and advisers are the same and some of the areas outlined above do define how a good professional adviser can add real value and support to a business and can help that business to get back on its feet and achieve the success that it first set out to achieve.

 

Written by Steven Mugglestone

April 9, 2013 at 8:51 am

Tenon’s clients paying a high price for their failure:

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Tenon’s clients paying a high price for their failure

There continues to be significant and almost weekly reports in the press about both the business issues and reported practices of the UK’s only listed accountancy practice, RSM Tenon.

I have read these with interest, as a former PLC Finance Director and now a partner in an independent firm of accountants and business advisers.  Much of what is being reported in the press now has been known within the accountancy profession for quite a time.  I read it all with both surprise and sympathy, surprise that a public listed firm of accountants can act this way and make so many mistakes in dealing with their own business and the operations of a public company and sympathy for their clients, as it their clients who are paying the increasingly high price for Tenon’s failing business model and practices.

What you learn from being a PLC FD

I worked as a Finance Director of a fragile small public company, which in the end had to be restructured.  When first appointed you do need to learn very quick lessons about the business’ relationship with the market, the stock brokers and the brokers’ analysts.

As well as publishing accounts, every six months, a Plc. also issues summarised forecasts about its anticipated performance in the coming year.  If at any time it believes that the results of the business will waiver by more than 10% it has to announce to the market, the Plc must inform the market again, and these are known as profits warnings.

What people sometimes do not realise is that that these forecasts are scrutinised and questioned by third parties to ensure that they are robust.  As a new FD, I was certainly surprised by the depth of discussion with the analysts at the stock-brokers.  They need to understand your business, your competition, your competitors, the areas you operate, the reasons and assumptions underpinning your projections and they question you accordingly to ensure that they are comfortable to support your business, its accounts and forecasts, in order to support its share price and trading.  The analysts do understand the business that you operate in and do have a good knowledge of your competition and structural issues, so “fooling” them or “being foolish” with them is not an option.

I am not sure whether Tenon have tried to fool the analysts or they just did not understand their own business, either way it is not the way a Plc. is expected to operate and certainly not what is expected from a firm of accountants, who should know better.

Given the recent appointment of CEO by Tenon, maybe they have started to realise this a little late:

http://www.accountancyage.com/aa/news/2152593/-pwc-managing-partner-takes-rsm-tenon-ceo-role

Acquisitions

Given the importance of ensuring that your accounts are robust and that your forecasts are equally as reliable, growth by acquisition must also ensure that you have accounted for and dealt with your acquisitions appropriately as well.

When a business acquires another business, they assess the assets and liabilities acquired and make appropriate adjustments for losses and other liabilities as well as making provisions for closures, redundancies and other liabilities and costs (and cash requirement) derived from the restructuring and bringing in the new business.

Tenon has grown by organic routes but also by significant acquisitions.  Individual independent firms and offices have been taken into the firm (on a part cash/part shares basis) and these are offices where the partners have not sort to continue their firm’s name with new younger partners but have opted out by selling to a national firm.

Tenon has also made two major acquisitions over the last couple of years:

  • RSM Bentley Jenison
  • Vantis Plc.

Both of these acquisitions have been cited as reasons why Tenon has problems.

http://www.accountancyage.com/aa/analysis/2140715/boardroom-clearout-rsm-tenon

Both acquisitions seem not to have been dealt with appropriately, as other businesses would.  Appropriate and accurate evaluation of the assets and liabilities of both businesses does not seem to have been undertaken and worse still; the market has been told that these businesses will add to the profitability of the main business.  Plcs do not act this way and accountants do know better, so why has Tenon done this?  Is it ignorance or is it deliberate?

Given that Tenon may need £20million from shareholders by way of a rights issue, the one thing that they will have to be certain of is their current position and forecasts for the future, if the market is to trust them further.  The have been described by their second biggest shareholder as a “company out of control.”  This is probably why they have chosen to quickly appoint an experienced new chief executive, which in itself is an admission of failure of their current business model.

Desperate for fee income and reported bad practises

All of these “mistakes” have added to the pressures for Tenon to grow and produce profits from their other core business areas, and that means making more money from their existing client base as well as acquiring new clients.

The Times (Saturday 11 February 2012) has reported the whistle blowing of a former Tenon director and head of their Southampton office, citing a number of “bad practices” including prematurely recognising income on cases before they should.  This can mean billing clients before work is completed or reporting income when bills have not been raised, before agreeing these with their clients.

We are also seeing more comments from appointments with potential clients that they have seen fees continually rise from Tenon, with no change in the service delivery.  This is obviously alleged and anecdotal practise of the business, but given the reports now coming to light in the press, there does seem to be fire included within the smoke signals.

Employee Benefit Trusts (EBTs) are ticking time bombs

Tenon has seen significant growth from their specialist tax products areas.  This area of work is not covered by the FSA as a financial product but lies within the area of specialist advisers, legal opinions and an advanced business understanding.

Employee Benefit Trusts (EBTs) is one such area that has been “sold” over the last 10 or so years, but EBTs are failing and fall well within the current anti-avoidance legislation brought in by recent governments.

Hundreds, if not thousands, of EBTs and similar have been introduced and businesses that have them in place, should now have been advised that if they wish to either sell, pass on their business to family members or clear up their tax affairs with HMRC, they must seek to close the EBT and negotiate, agree and settle the tax position, which could be significant with HMRC.  Businesses with EBTs are now considered to be un-saleable until the EBT has been closed and settled with HMRC.

Tenon has introduced many EBTs and similar strategies and their clients are now finding out that they have a significant problem to deal with.  Costs, time and fees in dealing with these issues with HMRC are significant both to the clients and to Tenon.  Engagement letters are likely to be very clear that it was all the clients decision to accept and deal with the risk of these strategies, but their clients will expect to get support, and we are talking about significant support amounting to £millions of fees and costs.  Given the pressures of Tenon to generate cash and profits and given that they are also likely to need a cash injection by way of rights issue, there is significant doubt whether Tenon and their clients will be able to agree on who is responsible for the costs of rectifying these mistakes.

As an independent firm with partners and senior staff from top 10 and top 5 firms, we have to make it clear that whilst we have the same experience, offer the same service and access to finance, tax and growth strategies, we do not have to face these pressures or issues.  We do not have the same high cost and overhead structures; we do not have the pressure to generate high fees to meet regional or national targets set by expensive head offices and we do not have to make high returns to shareholders; in doing that we do not have to sell high sell high risk “products” without offering the future support to our clients.

We are offering to help and support businesses with EBTs to help to rectify the position with HMRC and for SME businesses, we are also able to offer and provide audit, accounts and tax compliance service at a fraction of the cost of either Tenon or other national firms.  All of this is provided by the same experienced levels of staff as Tenon and other national firms.  For some of us, including myself, who have been Finance Directors to SMEs and Plcs as well, we can bring those skills and experiences to our clients as well.  As outlined earlier, I am astonished at the behaviour and actions of Tenon as a Plc.  I am not sure, at all if a Plc. model is appropriate for a firm of accountants, but on top of that, there are other significant business decisions and practices that Tenon have undertaken which many other businesses as well as accountants would not have done.

Profits for the first half year; significant losses the second half; profits warnings; black holes, restatement of previous accounts; £20million equity requirements; sacked board of directors; errors in acquisitions; bad practices with clients; over-billing; attempts to bring forward income; settlements in court; desperation for fees and cash; massive selling of failed tax strategies; disgruntled staff and disgruntled clients; and all this from a firm that was awarded National Firm of the Year in the 2011 British Accountancy Awards, …… Amazing or just The Emperors New Clothes!

We expect there to be continued issues and changes with Tenon, including whether they will return to private ownership.  We are, however, seeing continued discontent with both clients and staff and we are obviously keen to support and help both.


Steven Mugglestone BA FCA
,
Finance Director Services

Written by Steven Mugglestone

February 16, 2012 at 6:43 pm

Gut Instinct Does Not Replace Good Management Information, Just Ask the England Cricket Team:

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Gut Instinct Does Not Really Replace Good Management Information

I have seen it on numerous occasions, when appointed as a part time finance director.  The owner knows their business inside out, or so they say and believe.  The classic statement, “I know my business income and costs, a third direct costs, a third overhead and a third contribution to financing.”  So after a brief review of the actual information put together, which has never been done, my reply has been, “So what’s the other third then?!”.  “Oh.” is usually the reply.

How to ensure rock solid business decisions

The above situation is more common than you think and, at least in part, the tendency to make decisions on an ad-hoc basis is down to the general lack of good management information. If the numbers are not at your disposal, and that is financial and non-financial, then many businesses have little choice but to make decisions based on gut instinct.

Contributing to this issue is the unreliability of monthly management information, attributed to managers disregarding early warning signs of problems in profitability and liquidity.   In larger organisations with a number of senior management including sales and operational management, a classic technique in order to duck and avoid their own shortfalls and potential failings is to “dis” the management information, picking on the commas, the brackets and the spelling as evidence that it cannot be relied upon.  Nero and Rome aflame comes to mind.

Management is certainly moving from an art to a science. With the on-going computerisation of all business systems, moving on to cloud based systems allowing access and use on the go and more information becoming available to managers on which to make decisions.

With facts at hand, most business decisions become logical. For example, if you know that advertising in using email provides a 15% response rate and you convert 50% of these, as against another that generates a 5% response rate with a 50% conversion, the rational decision is to invest more in the advertising area that provides the greater return. The basis of decisions moves from gut instinct to evidenced based logic if the right reliable information is available.

What if you have poor management information?

The lack of reliable and timely management information can create many problems for entrepreneurs and owner mangers. All management training and business planning relies on being able to measure things to be able to manage.

One of the key reasons why the England Cricket have become the world’s number one test team is that they have an advanced system of information advising of how opponents react to certain styles of play and where balls need to be pitched.  This is based on reliable data from actual statistics.  And do you know what, ….. it works!

The consequences of not having reliable management information are clear – the business will not perform to its potential, because the right decisions are not being made.   The importance of Key Performance Indicators (KPIs) is vital for this success and the England Cricket team are a classic example of this.

Privately owned businesses that underperform have a significant impact on the financial well-being of the owners and, perhaps even more importantly, will create a level of stress that lowers the return for effort to an unacceptable level.

What can you see happening?

Everyone, at some stage, knows how it feels to need vital information but not have it to hand.   What may not be so obvious is whether you have information about the right things or whether the information itself is accurate.

A key part of the business planning process is to identify the business drivers, the KPIs, or those factors that drive your revenue and your major costs. KPIs can be seen as numbers but are not necessarily at all financial.  Examples include numbers of calls per hour, numbers of bums on seats, footfall, downtime, spend per head, machine hours, the weather and temperature, benchmarking against other businesses etc, etc.

It is crucial that your management reporting system measures such drivers. Being in a situation where the business drivers are not known or measured can be your warning sign. Another warning sign to note is major fluctuations between monthly results. This might indicate unreliable information and if that is the case, the warning bells should be sounding.   One example of fluctuations was order numbers, with a business having two good months and one poor.  On further review, the director responsible for sale, updated the sales brochure every three months, so was not out selling.  Easily fixed, but not discovered until the information was made public.

Interested in the issues?

Work with good business advisers, ones like McGregors Corporate, that include partners who have actually been Finance Directors and have been responsible for these improvements first hand.  Work with us and we both can obtain a proper understanding of your business issues, drivers and KPIs.

After that we can work with you to develop a meaningful business plan (which can be very simple) and forecast that you can measure against.   Being able to measure accurately and frequently the mission critical elements of your business will be the start of key improvement to your business, its profits and its cash.  Which business person does not want to see that happen?

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

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http://www.mcgregorscorporate.co.uk/

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steven@mcgregorsbirmingham.co.uk

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Business Turnaround, a Dark Art or Common Sense and a Proper Business Plan

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Business Turnaround, a Dark Art or Common Sense and a Proper Business Plan

More than half of Britain’s small businesses collapse because of cash-flow problems. The UK Insolvency Service sites 65 common reasons why businesses fail.  Many advisers and “experts” publish lists of a number of reasons, seven being a common number, unlucky for the failed business, with clearly a prize and first place going to the Insolvency Service at 65, clearly retired exhausted after then.

We like to keep things simple as this helps us and our clients, but we believe that the success of a business (and therefore the failure of a business) is down to one area (ok, poetic license as it is a related area), cash flow problems due to the lack of a real plan and system of control (i.e. the area that an experienced business orientated FD is good at).

Looking at seven common reasons why businesses fail, it points to the same cause and solution:

  • Business started for the wrong reasons and to try and make money quickly (lack of a real plan and system of control)
  • Poor management and lack of management (lack of a real plan and system of control)
  • Lack of capital (lack of a real plan and system of control)
  • Poor location and marketing (lack of a real plan and system of control)
  • Lack of planning (lack of a real plan and system of control)
  • Over-expansion (lack of a real plan and system of control)
  • No website (lack of a real plan and system of control)

No apologies for labelling the point but all FDs would say the same thing, lack of cash caused by a lack of a real plan and system of control and improvement.  Other recent articles that we have read with interest now refer to zombie businesses and that pretty much sums it up, a re-animated corpse, with no mind of its own; no control of its own; in fact control lies with others; never learning and never changing. In fact a favourite observation of ours is the common lesson for most areas of human behaviour; “If you do the same thing that you have always done, you will always get the same result.”  This is as important to businesses as anything else.  In fact in business, if you do the same thing that you have always done, it is likely that the future results will be worse than before.  We do recognise that many also say; “If it’s not broke then don’t fix it,” but this is also ignoring both normal wear and tear and inevitable depreciation.

Speaking to and working with people who have experienced or been a part of a business failure (and those of us that have seen, have worked with and have been a part of successful turnarounds), there are a range of views and emotions, noting the lack of support from interested parties such as banks, other lenders and major creditors, but in the vast majority of these, there is a common issue, lack of a real plan, lack of innovation and change, lack of a system of control which leads to a cash flow crisis.  In fact the references to lack of support from the bank, when explored further, usually uncover a situation where the business has pretty much lost control to the bank or lender.  There are also a significant and scary number of businesses which only produce annual statutory accounts, find out that they have made a loss, months after the year end; face another issue, such as loss of a major customer or restricted key supply and then tell the bank all the bad news at the same time, asking for funding/overdraft extension, with no solutions being offered by them.  They lack any plan in respect of the relationship, communication and information being given to their bank and are confused and angry when the bank then either refuse the extension or worse still, reduce or remove the overdraft facility completely.  We are not going to comment on the issues surrounding banking over the last two years or so, as this is well documented, but we are aiming to concentrate on how businesses can and should take matters in their own hands and control.

As we are still in what can only be described as challenging and uncertain times for businesses, there are now many who describe themselves as turnaround specialists and look to help to ensure that your business starts on a road to recovery.

I will now make a sweeping generalisation and observation, but in my opinion, there appears to be broadly three types of turnaround specialists;

  • Investors and their advisers who are looking to save the business but also to take advantage of the vulnerable position of the business, to take part or majority ownership of the business for considerably less than normal market value, this is harsh but to be expected;
  • Insolvency experts acting as expert advisers (but usually only looking to support the lending bank).  The reports that they produce and advice that they give can be very biased for not only the lenders positions, but for them to win the future work from the lender, quite a lot of business people recognise this with the analogy of putting Count Dracula in charge of the blood bank and emergency blood supply;
  • There are, however, other experienced advisers who have been there, done that and have the necessary skills and desire to help the business turnaround and be successful.

Going back to the title of the blog, despite the mystery and myth of business turnaround specialists, it is not a dark art.  Businesses are successful because they have a good product; a real plan; a system of control and improvement and control of their cash, businesses fail because they may have a good product but they do not have a real robust plan; have no real system of control and improvement and they do not have control of their cash.  Businesses achieve a successful turnaround because they eventually recognise the position that they find themselves in and take the appropriate action and introduce a real and robust plan; a system of control and improvement, no matter how simple, and control of their cash, before it is too late.

In some overtrading situations, where the businesses are growing rapidly, control can be lost as they did not believe that they needed it.  The sales and money keeps rolling in.  In many situations, we have seen the business hit a wall, when either an unexpected cost arrives (usually the tax bill, but if you do not have a real plan then anything could be unexpected) or when they face a supply problem.  We have seen many situations where a business has one main source of supply for a key component, product or service and when this supplier cannot provide the volume or specification required (or has gone out of business themselves); this has the knock on effect to our business.  This may fall under risk management, but it is common sense management that many businesses fail to address until it comes along to hurt them.  Having one supplier for a key area can prove fatal, indeed one key supplier sometimes can wield too much power over the business anyway.

As any successful and experienced FD would also tell you, a real plan is not only about one area, and it is common-place that the FD is the architect of the plan and its delivery; it is about ensuring that all parts of the business have a plan and the ability to deliver the plan and this has to include;

  • Recognition of where you stand, your strengths and your failings, what are your opportunities and what needs to be protected;
  • A good product/service combined with a marketing plan to deliver the appropriate sales;
  • A good knowledge of key supply and a good supply plan and agreements;
  • An operational and delivery plan, recognising and controlling key drivers in the business;
  • Appropriate recognition of your team development, management and leadership;
  • A budget which includes the key performance indicators relevant to the business;
  • An appropriate financial plan recognising the requirements for long term investment and finance as well as working capital management and short term cash flow;

Recognising the above and how an experienced FD can help and yes that includes the creative marketing stuff as well, when a business is facing financial difficulty it is cash that has to be the key priority and when we start to help this has to be the first area to control.  Sometimes, however, a formal insolvency route of administration or receivership will be required to allow the business to be put back on track, but sometimes a common sense plan will enable a business to right itself without the need for a formal insolvency process.

Some of the areas that a turnaround strategy and plan will include will be:

  • A thirteen week rolling cash-flow dealing with immediate and short term cash flow issues, identifying and managing the pressure points.  It is still remarkable the number of businesses that do not have a short term rolling cash flow plan.
  • A cash plan, breaking down what cash has to be collected weekly from debtors and how; what are the priority of creditor payments and then more formalised revised repayment schedules agreed with key suppliers.
  • A detailed recognition of short and medium term cash requirements and following a draft cash plan, engaging with banks and other sources of credit and lending to bridge the shortfall.
  • Recognition of the break-even position of the business and translation of that into a simple and understandable plan (i.e. the number of sales required a week or the number of conversions needed or jobs needed to be completed every week).
  • Following the break-even review, a plan for staffing requirements with the current and future work.
  • A marketing and sales pipeline made into a simple and realistic plan of hot leads and conversions to sales.  Who are they, where are we with the contract progression (which also recognises the price and profits for the contract) and control of this sales lead flow and reporting.
  • A rolling 13 week marketing and sales plan, what is coming in for the next three months and what marketing initiatives are being put in place for week 13 and onwards.  Having worked in retail this is a very useful, practical and vital plan that addresses every week the initiatives being put in place for week 13.
  • A profit improvement plan, reviewing all key supply and support contracts and where necessary going back out to the market for competitive tenders.  Again the real benefits will be obtained from having a full and detailed understanding of what it is you need and use, volumes, product requirements and when required, to be able to fully specify the tender and obtain realistic tender proposals.
  • A medium and long term plan of what the business needs to develop, following on from recognition of the business strengths, what are the real unique selling points that the business offers and how these areas should be further exploited for the benefit of the business.

We are not saying that business turnarounds are easy or can always be done with a positive outcome in every situation.  Sometimes the business has left the position too long or the market in which they trade has shifted significantly and the business has not changed to reflect that.  In many situations, however, businesses that are failing or are hitting a rough time can be helped and turned around by practical and common sense measures.  The business owner, however, needs to recognise the issue, take a step back and consider what is happening.  Many times the businesses are just doing the same thing over and over again (very zombie like) and with only their fingers crossed expect to see improvements and things change.  This will not happen in the majority of times and a more measured and practical critique and plan will be required.

I think it is fair to say that not all accountants and advisers are the same and some of the areas outlined above do define how a good professional adviser can add real value and support to a business and can help that business to get back on its feet and achieve the success that it first set out to achieve.

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

http://uk.linkedin.com/in/stevenmugglestonefca/
http://twitter.com/McGsCorporate
http://www.youtube.com/watch?v=nhC0wlglePE
http://www.mcgregorscorporate.co.uk/

T: 0845 519 5659                T: 0121 236 3317
steven@mcgregorsbirmingham.co.uk

Connect, call, talk, email, contact us, send a messenger pigeon and arrange a discussion, review and free meeting.

Tax Planning Newsletter Autumn 2011

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Autumn 2011 – McGregors Tax Planning Newsletter

Click for a copy: http://twitdoc.com/upload/mcgsadvisers/autumn-2011.pdf

Current Hot Topics

  • Tax efficient profit extraction
  • Tax efficient monthly directors’/partners’ remuneration
  • Use of pension money
  • Commercial property tax relief

 

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

http://uk.linkedin.com/in/stevenmugglestonefca/
http://twitter.com/McGsCorporate
http://www.youtube.com/watch?v=nhC0wlglePE
http://www.mcgregorscorporate.co.uk/

T: 0845 519 5659                T: 0121 236 3317
steven@mcgregorsbirmingham.co.uk

Connect, call, talk, email, contact us, send a messenger pigeon and arrange a discussion, review and free meeting.

Written by Steven Mugglestone

November 25, 2011 at 9:10 am

Location, Location, Location, Cost, Cost, Cost, Service, Service, Service

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Location, Location, Location, Cost, Cost, Cost, Service, Service, Service

As any business should, we are constantly reviewing what is important to our current and future customers (yes, we are a business and yes, we have customers; we sell services and products; and yes they are also our clients as we have a professional responsibility to do what is best for them and to represent them to the professional standards that we have been trained to meet).  Customers and clients are not mutually exclusive, you ensure the best possible service to your customers and you will do the same for your clients.  Many accountants shy away from this, constantly referring to their clients, trying to disguise the simple fact that we are also in a business, our clients are also our customers.

From our research and understanding we have simplified the key issues facing our customers, when they look to choose an accountant and adviser down to three, location, cost and service.

Location, location, location

Some businesses only sell to their local market.  Most businesses look to sell to their local market and beyond.  Many businesses look to sell throughout this country and beyond, and in respect of Virgin Galactic well, it starts to go further than that.

Whilst most businesses look for customers across a wider geographical spread and are happy to travel themselves, they will look to choose an accountant within a mile or so of their offices.  Why, when the accountant and their staff can travel and we live in a world where communication is almost instant.  I remember a time, not so long ago, when documents and plans being drafted were sent by post and returned with manual mark-up changes.  This is now instant, technology has moved on.  We are moving to the provision of monthly online accounting for clients as well as keeping up with the online filing with HMRC and Companies House.

A business does not have to walk around to their accountants office to discuss a problem, depending on an accountant’s approach to email, you are likely to get better value from your accountant by emailing your query and getting a written response, rather than exchanging niceties face to face or over the phone which, unless you have a fixed fee arrangement, you would be paying for under the traditional/old fashioned hourly charging basis of many practices.

An accountant who is available via email can give a more considered answer to your question and provide links to useful resources. There are also very few queries which need an instant response.

You may also consider whether your accountant needs to be local at all. Do you really need to have a regular face to face meeting? Do you value having a local accountant over the distant, competent/specialist, cost effective accountant? Perhaps there is a middle ground, literally as we generally help clients within the Midlands region of the larger West Midlands/Birmingham area, Nottinghamshire, Leicestershire and Lincolnshire.  All of this is achieved within an hour’s drive from one of our offices.

In over 20 years in practice, I find that a client/customer face to face meeting is becoming less and less necessary, although we very much have appropriate meetings with clients directly as part of our key planning process to ensure that we are still providing our client with the most appropriate advice and service. Correspondence is generally via email and telephone. Queries/advice are usually emailed and read/answered at each other’s convenience which is more efficient than leaving messages for each other to call back and also the questions/answers are more focussed.  Meetings are still held to discuss key issues and for periodic updates, but these should be focussed to achieve an appropriate outcome for both parties.

Some accountants will “sell” location, but just because they have an office on your doorstep does not mean that they will provide you with the most appropriate service and advice and at the most appropriate cost to you.

Some accountants and auditors actually seek to perpetuate the myth that location is vital by seeking to send their staff to a client’s premises to spend longer than is actually necessary.  For those out of the audit profession, most audits can be split into equal thirds of time; a third planning, whereby information is gathered and key issues are identified; a third fieldwork, whereby the audit testing is carried out; and a third completion, when reports of key issues and treatment and checklists are completed.  Only the fieldwork requires staff to actually be at a client’s premises, and then not for all of that time either.  Some accountants actually encourage their staff to spend longer at the client’s (customers’) premises than is necessary to make it look as if significant time is being spent, when mostly the client’s staff could do without the auditors being there for longer than is necessary.  We are honest enough to explain that to our client’s the process and will only spend the appropriate time at the client’s premises.  If the managing director wants us to be there longer as they see the visibility of the auditors as important then we will, but this will done as part of an honest discussion around what is actually required.

Cost, Cost, Cost

Interesting one, and a key issue that many accountants really do shy away from, when many other businesses have to transparent and open.

The key issue is that many accountants continue to use an outdated (Victorian) business model for their own business.  They charge by the hour (usually by 6 minute units) and continue to do so for whatever they do, and some firms 6 minute rates can be quite high (let alone an hour).

There is a different model and certainly one that we adhere to.  General compliance work (i.e. the stuff that has to be done for legal/tax reasons, the accounts, audit and tax returns) is a commodity product and can be set at a fixed price and this price does not need to use high charge out rates with partners charging even higher rates for their minimal input.  The majority of this work is process driven and costs can be kept low.  Many SME businesses pay far too much for this work.

A separate area of service is where you can actually make a different to a business; save them tax; reduce their costs; increase their profits; grow their business or find them finance.  Again, is an hourly rate appropriate?  We do not think so and will always look for the fee/cost to the customer to reflect the VALUE of the work done and SAVINGS or IMPROVEMENTS that we have achieved.  Surely this is WIN/WIN in the game theory rules of business.  A dark art, I do not think so, but honest and open business.

Service, Service, Service

“You pays your money and you takes your choice,” well, sometimes.  Service covers a multitude of areas, including, but not exclusively being polite and acting quickly for your customers.  Most clients/customers use the term Pro-active, when asked what it is they are looking for from a client.  To be pro-active, you have to offer a wide range of services to a client and understand where the client is going, where they are now and what are their aspirations and goals.  You also have to care; none of this is about completing accounts that are six months or more out of date.

We believe that to provide great service for all SME businesses there are number of key factors:

  • A partner lead service from an experienced, approachable and positive business professional
    (many accountants can either sit in ivory towers or just do not have the drive or experience)
  • The ability to grow and drive a business with the skills of a commercial Finance Director,
    (most accountants have never worked within a business or part of a business at all, yet claim to be business advisers and specialists)
  • The provision of strategic marketing and sales opportunities to grow a business organically
    (most accountants do not understand marketing and shy away from this crucial support)
  • The control and reporting skills for a business with the skills of experienced auditors
    (most small and mid-tier accountants, have never been part of large complex auditing or accounts assignments, and larger firms can cost…..a lot!)
  • Obtain finance to ensure your business continues to grow
    (corporate finance is still a crucial part of a business success and requires experienced and “well-connected” professionals to deliver appropriate funding)
  • Provision of innovative tax saving structures with the support of imaginative tax specialists
    (large firms sell their own “products” under the heading of advice, small firms tend to hide under a rock, but tax planning is still very crucial and strategies and planning opportunities change as often as tax laws do….. tax laws change as the tax planning proves to be effective and legal.  Some people claim that these are loopholes, when actually it is the law)
  • Control and reduce your costs with utility, insurance and other key supplies associates
    (in today’s climate cost control is vital, and this includes your audit, accounts and tax compliance costs as well, but find an accountant who can source other cost reduction reviews, as part of my first FD position, we reviewed, re-modelled and re-tendered out all main costs, having fully understood what usage we faced .… and this included the audit)
  • Innovative structures to protect and grow your wealth
    (never have an IFA/wealth management specialist provide support without being part of an accountant team, they need to work together)
  • To maximise your wealth and value of your business when the right times comes for you to sell or retire or pass on your business to your family
    (experience, experience, experience and the skills of an FD to really groom your business for sale)
  • Pass the barbecue test.  I spent some time with a UK wide group of FDs and after all the experience and qualifications part of the recruitment process, the final part of the recruitment procedure was whether you were a person who you actually wanted to spend time with, have a drink with at a bar or barbecue, someone interesting and with personality.
    (ACCOUNTANTS/AUDITORS …… enough said!)
  • All of this should be provided with a smile on their face and with real positive attitude and energy.  Their aim is to improve your business and personal situation and their attitude and drive to do this should shine through.

Get yourself the right accountant today and you will not be repeating this process for years at a time, but also do not be afraid to get a check-up and re-tender a service proposal to find out what else is out there.  Accountancy firms change; some get better; some get lazy; some get more expensive and some never had it in the first place.  Better yet, you will save yourself tons of time and money in the long run, and you will have a new trusted partner to bounce ideas off of down the road.

A Final Joke

A newly qualified chartered accountant applies for a job advertised in the Times.  He is interviewed by the owner of a small business who has built it up from scratch.

“I need a qualified accountant,” says the man, “but mainly I’m looking for someone to do my worrying for me.”  “How do you mean?” says the accountant.  “I have lots of things to worry about, but I want someone else to worry about money matters.”

“OK,” says the accountant. “How much are you offering?” “You can start on sixty thousand,” says the owner. “Sixty thousand pounds?” exclaims the accountant, “How can a business like this afford
to pay so much?”

“That,” says the man “is your first worry.”

Steven Mugglestone BA FCA,
West Midlands Area Director and Finance Director Services

McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business
McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

http://uk.linkedin.com/in/stevenmugglestonefca/
http://twitter.com/McGsCorporate
http://www.youtube.com/watch?v=nhC0wlglePE
http://www.mcgregorscorporate.co.uk/contact-us.html
http://www.mcgregorscorporate.co.uk/

T: 0845 519 5659
T: 0121 236 3317

steven@mcgregorsbirmingham.co.uk

Connect, call, talk, email, contact us, send a messenger pigeon and arrange a discussion, review and free meeting.

Does your Accountant really have the Ability and Experience to Help Grow Your Business?

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Does your Accountant really have the Ability and Experience to Help Grow Your Business?

And we mean really helping your business grow …….

Ask yourself the question; what should a business look for in an Accountant and Business Adviser to provide your business the advice and support it needs to really grow and prosper?

McGregors Corporate can provide the answer and the real difference, Ability and Experience, delivered by innovative and very approachable finance professionals: Ability and experience ….

  • …. to grow and drive your business with the skills of a commercial Finance Director
  • …. to provide strategic marketing and sales opportunities to grow your business organically
  • …. to control and report your business with the skills of commercial auditors
  • …. to obtain finance to ensure your business continues to grow
  • …. to provide innovative tax saving structures with the skills of imaginative tax specialists
  • …. to control and reduce your costs with utility, insurance and other key supplies associates
  • …. to provide innovative structures to protect and grow your wealth with commercial wealth management specialists
  • …. to maximise your wealth and value of your business when the right times comes for you to sell or retire
  • .… and we hope you will enjoy our company over a drink or two,….even if it’s only a coffee.

Our principals’ backgrounds and experience include many years with international accountancy practices and as commercial financial directors.  We have helped start and build businesses; raise funds from banks, private equity and stock exchange.  We have re-structured and re-launched businesses and helped turn around businesses facing trading issues and we have helped business owners maximise the value of their business when the time is right to sell.

Our aim is to provide the quality, experience and range of service of an international firm at the cost of a local practice, all delivered by really nice people.  With McGregors Corporate, our Ability and Experience will prove to be the real difference.

Ask yourself again, does your accountant really have the Ability and Experience to help grow your business?

Steven Mugglestone BA FCA,
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

http://uk.linkedin.com/in/stevenmugglestonefca/
http://twitter.com/McGsCorporate
http://www.youtube.com/watch?v=nhC0wlglePE
http://www.mcgregorscorporate.co.uk/contact-us.html
http://www.mcgregorscorporate.co.uk/

T: 0845 519 5659
T: 0121 236 3317