Bookcheck | Transform your Profitability

Horses for Courses – why would Accountants handle bookkeeping?

Posted on January 6, 2020

Now we’ve had our 25th birthday I think I can afford to comment on our relationship with firms of accountants which we are not even though our Team includes eight qualified accountants. We’re purely what it says on the tin - bookkeeping with management accounts + a payroll bureau.

All our clients have their own external accountant with whom we liaise at the year end. We also win new client referrals from some firms. We can see a great range in their attitude to ‘wanting’ to handle bookkeeping - this varies from absolutely no wish whatsoever though to being keen to provide.

So where do the horses come in? Well, if you are a firm of accountants, do you have the right horse, or should you focus on a different course? To put it another way - why would you be interested? Is it really improving profits or is it just turnover?

Some months ago, we proposed to a £1m business. They were a very good fit for our service. They liked our proposal and showed it to their accountants who quickly undercut our fee. The prospect thought that it sounded like a good idea, a one stop shop at lower cost, so we lost it. I couldn’t help commenting to the prospect at the time that the chances were that it wouldn’t work out.

Some 4 months later the prospect told me – “You were right. They’ve never got to grips with data communication, scanning, or a routine and despite charging us for management accounts we’ve never received any”. So we now have a chastened new client.

So why did they do it and why didn’t it work out?

I guess they did it because of some combination: they didn’t want to say no, thought the client might leave them and they wanted the billings.

I would say it didn’t work out because they were not set up or resourced to ‘do a good job’, including management accounts which we find is often missing.

So, what would we suggest to a firm of accountants? The key point is to check the course. Are you really geared up to win that sort of race otherwise why not concentrate of what you are good at which is a different race.

By the way, have you noticed how progressively it’s becoming more and more difficult to recruit quality staff - all the more reason to harness them to much more profitable work, which is what they prefer doing anyway, rather than book-keeping.

Do you have the Horse for the (Book-keeping) Course?

Boost your Profitability by using quality Management Accounts

Posted on November 29, 2019

In our 25 years of experience we often take on clients with issues, often unknown, surrounding their management accounts.

If you’re serious about improving you profitability then naturally you’ll ensure that you receive promptly, every month, the key information, both financial and non financial, that you need to run your business effectively and efficiently.

This isn’t what your accountant gives you in their format or what you’ve inherited. It’s what you and your team or Board have determined that you need. You’ve really got to "own" it otherwise you risk not extracting the most benefit from the potentially precious information.

Some issues are obvious and easy to identify such as just no management accounts or they’re far too late or of poor quality. What tends not to be obvious or even admitted are personal user ‘difficulties’ around the table. These broadly fall into two categories. The first is a simple lack of understanding of what the numbers mean and what action consequently should be taken. The second is in accepting a sub standard form of reporting, perhaps assuming, probably wrongly, that it can’t be changed or that such would be too expensive.　

A sub optimal reporting scenario is a shame but it’s worse than that. It’s potentially costing serious money if management decisions are being delayed or prevented because of the lack of quality MI.　The funny thing is that, in our experience, most issues mentioned are pretty straightforward to deal with and are well worth considering.　

Beware - it’s not a good idea to carry on with the same reporting that you inherit without reviewing as to whether or not it’s fit for your purpose. Circumstances may have changed over time so that the reporting needs adjusting but this won’t happen automatically.　

Of course this applies equally to charities where arguably it’s even more important to have the MI and understand it as Trustees are personally responsible.　

One of the most profitable developments in a reporting system is to split the single Profit & Loss report between different parts of the business such as in BookCheck where we report separately on each of Bookkeeping with Management Accounts and Payroll. They’re different businesses with different margins. If they’re mixed together in one, whilst you can still tell the sales performance, you don’t know which is improving its margin profitability and which is not – there’s no way of telling.

Perhaps the most difficult obstacles to overcome is for a user to admit a lack of understanding. To a certain extent that’s down to the service provider checking, asking, hinting or otherwise. But it’s mostly down to the individual getting real.　

Quality Management accounts should be a terrific basis for boosting the profitability and hence value of the business so our advice is - don’t waste the opportunity.　