Written by Andrew Spillman-Hays, head of management accounts at Champion Accountants
In business, and particularly accounting, surprises tend to be unwelcome. The element of surprise might be lauded in other areas of life, but it is rarely good news in bookkeeping and financial planning.
Fortunately, it doesn’t take much more than a great team and good software to all but eliminate surprises from your business financials. And it’s essential that we do keep uncertainty at bay, because it has the potential to derail even the strongest-seeming business.
As Head of Management Accounts at Champion, I consistently analyse data to understand what’s on the horizon for my clients. It’s a service that’s essential for even the smallest business. From day one of operation, my advice to any business owner is to establish processes that allow you to keep track of your financial position.
At a base level, this includes basic bookkeeping, which results in live tracking of your Profit & Loss account. Whether you’ve just launched or you’re ready to improve your processes, the first step is to set-up a business bank account and ensure that only business transactions go through it. This makes it easier for your accountant to analyse your business. From there, a Xero account is essential. As a Champion client, your business bank account would be linked to Xero, giving both you and your management accounts team real time access to live financial data, from anywhere. Xero’s extensive range of add-ons then allows us to automate and digitise processes further – uploading purchase invoices using Dext, for example.
With this data in place, your management accounts start to take shape, and along with month-end journals for accruals, prepayments, depreciation, and anything else that may be required, help to begin a process of identifying relevant data about your cash flow that has the power to make or break your business. Depending on your business goals, we track results year upon year, quarterly or monthly, keep a tight hold of distinct budgets, and see at a glance where debt sits and the action required to recover it. We can discuss your KPIs and design ways in which to track them, giving access to upcoming successes or challenges to be tackled before they become problems.
What’s more, this constant monitoring of a business’s financial situation reduces errors to an absolute minimum. While neglected accounts can hide untold mistakes, ready to rear their heads at inopportune moments, there is nowhere to hide in carefully tended books.
While many businesses have all this data at their fingertips, so often it still goes unchecked. For that reason, at Champion, we always advise monthly meetings – whether virtually, or at your premises or ours – to discuss what’s happening in your finances and areas that require action.
We work with one client that owned five fast food franchises. By breaking the business down into five different profit centres, it was clear to see that most franchises were making profits, but one wasn’t. As a result, our client made a decision to sell one store and sees a much healthier profit month-on-month from their remaining successful stores.
Without real time financial data, split to reflect his operating model, this insight would have remained uncovered.
The risks of untracked finances are severe. Without live information, it is impossible to truly understand the solvency of a business. Are you performing as you expect? Are you up or down? In the red or in the black? And the danger of this is that you do not have time to act before disaster strikes. Perhaps an easy solution to a business’s woes is to take out a short-term loan – there’s a time limit on this – wait too late and you’ll be denied credit. Any element of surprise works to undermine success, derail forward planning, and ultimately damage your business.
The good news? It’s easy to establish real time data tracking and analysis, and if you don’t have time to watch the minutiae yourself, Champion can do it for you. Get in touch on 0161 703 2500 or info@championgroup.co.uk to find out more.
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