The company had a turnover of around £1.2m and was owned and managed by a husband and wife team. The husband provided the training and the wife was MD, with responsibility for looking after sales and new business development. Although the company were doing well in the UK, they had tried to expand into both the USA and Australia with little success. The investment needed to support this venture had resulted in the development of a complex system of moving money daily to ensure there was sufficient funds to pay the bills and the VAT output on recent invoices.
Their only investment in specific finance related skills to support the business was a part time freelance administrator who looked after the bookkeeping, but was not a trained bookkeeper.
Lastly, they had been approached by a business who were interested in acquiring the company. The management team knew that, in order to sell their business and secure a good price, their accounts needed to be in better shape with budgets, forecasts and management accounts in place to prove both prior performance and future potential.
The key issues identified included:
- Nothing reconciled on the balance sheet and opening balances did not match previous years’ statutory accounts
- No cashflow forecast
- Overly complex and inefficient processes in place to manage day to day accounts
- Limited understanding of posting payroll journals
- Incorrect dating when inputting invoices
- Their potential buyer wanted an initial meeting in 3 months’ time
The training consultancy were particularly interested in the managed service that YRH specialise in, and the ability to “in-source” their accounting with our part time on-site team, as they were not comfortable with outsourcing.
Working with YRH, they quickly recognised that their accounting was not a role for one person, but a combination of a bookkeeper to deal with the day to day AND a financial controller to prepare the reports, improve the controls and manage their overall finance function.
This combination of skills working on-site with them quickly achieved real clarity in the financial performance of their business, a key requirement with their potential buyer wanting an initial meeting just 3 months later.
YRH carried out a full review, focusing on refining processes and increasing visibility. Key actions included:
- The balance sheet was corrected and reconciled as a first priority.
- New processes were implemented to allow for regular reporting on all areas of the business.
- A structure was put in place so that the company had an efficiently run and proactive finance function in-house.
- A budget was agreed and cashflow forecast produced.
- A framework was introduced for regular reporting on how the business areas performed against budgets and prior periods.
YRH were able to step in to the business and within 6 weeks the information that had been entered wrongly was corrected, brought up to date and reconciled.
Within 3 months a budget for the forthcoming year was agreed and cashflow forecast produced making comparison possible of actuals to budgets and to the previous year. The cashflow forecast allowed the MD to see the months when larger sums, such as Corporation Tax, were due for payment, allowing her to plan. She no longer had to spend part of every day moving money between accounts and calculating what the new creditors were.
Comparison profit and loss figures were produced month by month for the year to date, which the management team were able to analyse and feel confident of. With the ability to quickly and clearly see how the various business areas were performing against budgets and prior periods, the MD had 100% confidence in the numbers and felt supported by the YRH team who reviewed them with her every month.
Making a difference from the outset:
- Within 6 weeks, the numbers were reconciled correctly
- Within 3 months, a budget was agreed for the coming year
- Margins on the business became consistent and trusted
- The MD had 100% confidence in the numbers
- Clarity around customer spend allowed wider company reviews
- Clarity on the numbers allowed the company to confidently plan for any major expenditure
The results of working with a structured and experienced finance function allowed the company looking to buy them to see the performance of the business via reliable figures produced by a qualified accountant. We are delighted to say that a deal was done and our financial controller produced all the budgets, schedules, analysis and forecasts that the buyers required for their due diligence. The business owners secured a good price for their business and were able to focus on their next project.Book a discovery call