Improved cashflow management brings profitable growth and peace of mind

The challenge

As many business owners do at some stage in their business life, Paul Greenhalgh, managing director of SkillWise, and his fellow director Wayne Soutter had an inexperienced (and cheap) self-employed bookkeeper (a friend of a friend) looking after the bookkeeping for them. A local firm of high street accountants was responsible for the annual accounts and tax returns, filing VAT returns, running the small payroll and preparing quarterly management accounts. It cost around £12,000 a year.

But Paul and Wayne found they were getting more and more involved in invoicing, payments and correcting errors made by the bookkeeper – there seemed to be loads of spreadsheets. And the management accounts lacked any kind of clarity. Sales and profit fluctuated wildly every month, even though SkillWise invoiced monthly subscriptions, and the accounting costs were increasing, even as the cashflow got harder to manage.

The directors were confused and frustrated, and neither the bookkeeper nor the accountants had any answers. Finally, Paul and Wayne had had enough of the lack of money management and sought additional help.

The solution

SkillWise wanted their accounting support to be efficient, cost-effective, and sustainable, rather than a short-term fix. They didn’t have time to recruit someone (and were also nervous about making the same mistakes again), and they didn’t want to have to run “accounting” as well as everything else.

We initially assessed their existing bookkeeper, providing key training, while also reviewing the accounting processes, but clear skill gaps emerged. We know that all businesses need someone doing the day-to-day and a more experienced financial controller. Wayne and Paul quickly realised they would benefit from us implementing best accounting practice and access to our unique, managed team service.

Over the first month, a YRH Financial Controller put better, simpler bookkeeping processes in place (YRH best practice) and worked with a YRH Finance Manager to get customer payments collected and the bookkeeping up to date and under control. Wayne and Paul were massively relieved, and even more, delighted when they realised we’d effectively paid for ourselves through collecting outstanding payments.

A two phase approach

YRH worked in two phases to first help stabilise the finances, before further supporting the growth of SkillWise UK.

Phase 1: Stabilise

• Focused on getting the billing up to date, we helped SkillWise communicate recent price rises to clients, issued invoices for missed billing and put in a control so that recurring billing was prepared automatically.
• We concentrated on collecting all the customer money owed, implementing YRH credit control best practice, which includes debt monitoring and weekly status updates.
• We introduced deadlines for suppliers sending invoices every month, implemented regular payment runs, and got the directors’ expenses up to date (they were shocked at what they were owed).
• We replaced the many duplicated and complicated spreadsheets that were being used with a simple set of insightful management reports and graphs.

Phase 2: Growth

• We worked closely with Paul and Wayne to help prepare the business for growth, including developing an annual budget and action plan.
• We analysed the revenue being generated by the sales people, and the cost of customer acquisition in marketing which helped them make informed decisions about both.
• Analysis of the existing revenue by product type, industry type and business channel helped them refine their new business strategy.
• We reviewed sales pipeline, client profitability, and implemented project costing for quotes.
• We helped them develop a costed technical roadmap to manage technical development costs after the management information showed they were over-investing.

The results

Paul and Wayne freely admit that they hadn’t appreciated how poorly they were being supported until we started work with them. Their relief was apparent from the outset.

A snapshot of how accessing the right level of support helped SkillWise:

• First set of management reports and a robust cashflow forecast received within first month
• £90,000 of missing billing identified & invoiced.
• Debtor days reduced from 87 to 32 days within 3 months.
• £120,000 cash improvement in 2 months, the overdraft removed and a healthy bank balance ever since.
• Profit increased consequentially and directors had appropriate information for proper planning.
• £36,000 refund of corporation tax from R&D tax credit missed claims.
• No more unexpected immediate payment of tax bills
• Visibility of profitability on project work and technical spend.
• More consistent margins and complete visibility of breakeven point.
• The directors felt their work/life balance became greatly improved.