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Case Study Dont Let Your Finance Team Hold Back Your Business

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Too many companies have an underperforming finance team. Don\'t be one of them.

Published in: Business, Economy & Finance
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Case Study Dont Let Your Finance Team Hold Back Your Business

  1. 1. Case study Don’t let your finance team hold back your business Introduction There are enough challenges and risks that stand in the way of building a successful business but there’s one issue that we see all too often which shouldn’t be a problem and yet it frequently has a detrimental effect on the results, prospects and value of a business. It’s the situation where the business is held back by its finance team. Symptoms The common symptoms of a poorly performing finance team can include:  Late or no management accounts  Old debts not being collected  Issuing invoices too late or missing them altogether  Complaints from suppliers who are not being paid  Erratic cashflow  Lower than expected margins  VAT and PAYE difficulties, late payments and penalties  Complaints from other parts of the business about a lack of useful information  Management time being spent firefighting instead of growing the company  No one has a clear idea of business performance Of course some of these symptoms could occur in a poorly performing business that has more fundamental problems with making a profit in the first place. However, where there is every reason to think the business should be sound and yet we still see these symptoms then it may be down to a poorly performing finance team. Problems There may be several possible problems underlying these symptoms. Don’t let your finance team hold back your business Page 1 of 3 Copyright @ Blue Dot Consulting Limited. Not to be reproduced or copied without express permission.
  2. 2. Case study Don’t let your finance team hold back your business Firstly, the bookkeeper(s) may not have the right training or the right supervision. In a small business the bookkeeping (which is rarely a full-time job) is often an add-on to someone’s existing job. The “volunteer” may not have had the right training for the job and so their performance is not what it could be. It may also be that the bookkeeper is not up to the job and all the training in the world is not going to make a difference. Secondly, the financial manager / controller may not be up to the job. This is worse than a problem at a junior level because this person will be pivotal to the entire finance team and the company working well. A problem here will mean that the bookkeeping staff are likely to be mis-directed, doing tasks poorly or completely missing really important jobs. Also, the senior person will be responsible for producing useful financial information on which decisions are made. Incorrect decisions made on the basis of poor data may have far-reaching consequences for the business. The external accountants may be brought in to help if things are going badly, but they may already be part of the problem. Should they not have spotted the under-performing team and offered help earlier? Even worse would be if they came up with some recommendations in the past which were fine in theory but just did not work well in the daily cut and thrust of the particular environment they were applied to. Not all accountants in practice have worked in companies like yours! Finally, it’s rare that an MD has ever run a finance department and so they may not know how to identify, let alone tackle, these problems and the MD can easily be blinded by jargon and excuses presented by the financial controller. Solutions A number of solutions are possible and these range from some well-targeted training to the nuclear option of “rip it up and start again”. Don’t let your finance team hold back your business Page 2 of 3 Copyright @ Blue Dot Consulting Limited. Not to be reproduced or copied without express permission.
  3. 3. Case study Don’t let your finance team hold back your business A good starting point is trying to close the gap between the books and the board i.e. ensure that the right information required to run the business is being produced, accurately and on time. This can be through a combination of on the job training and improving systems and procedures, perhaps by adding new controls and processes that are not currently in place. There may be a layer of financial control and management that is simply beyond the incumbent team. In this case it’s sensible to add a layer above them to deal with the trickier aspects of the job – management accounts, perhaps, or preparing and maintaining a cashflow or budget model. This will usually be a part-time, more senior person who can bridge the gap. At the other end of the spectrum, the best answer may be to outsource the entire finance function. In our experience, the work can be done at the client’s office or ours but always there is close contact with other staff in the company to make sure that the accounting is covering all aspects of the business. Outsourcing may be a long-term solution or it can be a stop-gap until the right internal people are found if heads have had to roll. And, unpleasant as it may be, if you have the wrong people doing the job then the sooner they go the better for your business. Conclusions Each year we see too many businesses being held back by poor accounting and finance staff and the negative impact can be substantial. Although the MD can usually sense that something’s not quite right, it’s often beyond their experience to know what needs to change. Things carry on as before, but that’s no solution because this isn’t an area where things get better by themselves. Our solutions range from working with existing staff and giving them the right tools to do the job, adding a layer of more experienced input where required, to taking over complete responsibility for the accounts function for as long as required. Irrespective of the solution we implement, the companies we work with all say that not only are they better off for making changes, they really wish they’d done it sooner. Don’t let your finance team hold back your business Page 3 of 3 Copyright @ Blue Dot Consulting Limited. Not to be reproduced or copied without express permission.

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