Bookkeeping

"We Measure so our Clients improve" - a strap line or a fact?

Our target client has a turnover from £500k up to £5M although we have some well above that. I suppose it’s no surprise that we attract prospects who invariable are not receiving prompt and quality management accounts or MI. Although, naturally, we see a biased sample, it never ceases to amaze us how much they are missing by not having quality numbers at their fingertips.

Instead of which most businesses measure almost entirely by sales, orders and bank balance. But this is missing the magic word profit and there’s no hint of margins or overhead control. Most owners are busy managing the business but not the bottom line.  

So why is there such a vital gap?

•    a lack of skilled resources
•    a lack of drive to fix the problem


So what’s the benefit of measuring?

After sales, the two key components of Profit are Margins (sales less cost of goods sold) and Overheads. For both, the first objective is simply to produce the information but it must be sound otherwise it won’t be respected or used. Then a comparison with the previous month and previous year would be sensible and an encouragement to improve. It’s often possible to benchmark against an industry average to see how it compares. Then the trick is to take action, whatever that may be, to improve profits.

It’s all very well and a vital first step to produce sound Profit & Loss information  but it’s really important to split a business when measuring margins if in fact there is more than one distinct activity. For instance, with BookCheck Ltd we have effectively two businesses in the one company. The first is book-keeping with management accounts, the second is payroll with auto enrolment. They have different margins. If they are mixed up together then what has caused the up or down of the margin? Which part has done what? There is in fact no way of telling unless they are split. Which is not difficult, it’s just that most of our new clients have never done this. 

Margins should also be split by contract, where practical. We have a client with 25 contracts at any one time, lasting 2 to 3 years. Before we split them, the company had one overall profit margin with no idea of individual contract profitability. All they had was a hunch which turned out to very inaccurate and worse than useless. Now they have 25 separate Profit & Loss reports which flow automatically from our BAR - BookCheck Advanced Reporting. The magic was when they recognised that some were good, so they looked for more like them and some were bad so they aimed to improve such or avoid in future. Guess what happened to the profits – of course, a big improvement. Over time it's increased their overall gross margin by 5% which on a turnover of £3M has added £150,000 straight to their bottom line. That's one heck of an achievement based upon just quality reporting. The best bit is that it was not difficult to achieve.

Measuring overheads likewise is the basis for a significant reduction in costs. Would 10% be reasonable? Why not aim for 20% which of your total is how much on your bottom line?

So measuring is a great basis for improvement, it’s up to you

Author - Anthony Pilkington, Managing Director of BookCheck Ltd 

On or Offsite?

Online working or Onsite?


Our work of book-keeping with management accounts plus a payroll bureau was about 85% online before Covid-19, now of course it’s 100%. 


Gradually over the last 10 years our clients have moved towards an offsite service and nearly all new prospects want this. We’ve always delivered payroll this way – for 25 years. But now the remaining few have been forced to change. Perhaps surprisingly the transition has been pretty smooth - it helps a lot that we are very used to such a change. It clearly begs the question as to whether any of this should revert to onsite after this virus - time will tell.


Of course it’s not all positives - it does rely on the client to communicate efficiently. Most clients do but not all. There may be a bit of work assembling data to be sent to us but this is rapidly dwindling as more and more source data becomes electronic, such as purchase invoices. Documents now tend to be sent to software that routes the data automatically into Xero and the like. Such changes always improve efficiency and in some cases literally transform the business – it’s great to behold.


We abandoned going onsite to London years ago – the added costs and travel time were just ridiculous.


Canary Wharf – would you travel there for a new client?


We were all set to be appointed to a major new client with the first task being to sort out a huge reconciliation mess. We offered to do all this offsite as travelling to Canary Wharf was impractical for the staff we would have used. The prospective client declined our proposal and politely insisted that all the work had to be handled onsite and to a very demanding timetable.


The company needed an immediate start and wanted someone to work totally onsite full time for two weeks in Canary Wharf as it required working closely with their Finance Manager on a complex task. We questioned this as our 25 years experience told us that none of this work needed to be done that way. We therefore suggested that some initial work could be done onsite but other work could be completed remotely. 


Instead the company decided to use an onsite contractor to handle this phase 1 with a view to appointing us ongoing in the phase 2. Half way through phase 1 the contractor left, without notice. The work had been left in a poor state and the need was even more urgent with an extremely tight timetable for completion looming. We picked up the baton to achieve the complete reconciliations. The extremely tight deadline was achieved after the BookCheck team had unpicked and resolved the errors that had been made.


•    Our staff (from 60 staff) were split into teams, allocated to different streams of the work in order to get up to speed quickly and within the completion deadline 
•    We worked extremely long hours, including a full weekend and pulled together to complete phase 1, facing considerable time pressure to complete everything by an immovable deadline. This included a two year VAT reconciliation - transactions from Sage had to be manually ticked back to transactions migrated to Xero to ensure the first MTD VAT return was completed accurately and on time as it was. This work started on 2nd September for the VAT quarter that was due to be filed with HMRC by 7th September
•    FD and Financial Manager of the client provided schedules to show how things should be appearing in the accounts; BookCheck were tasked with making sure the accounts matched up
•    A lot of the work that the contractor had handled was unpicked and corrected.

The point is that All of this work was done offsite, without the BookCheck staff meeting anyone at the client. We acknowledge the full support from the client in assisting and communication with us – this was essential in achieving the objective.

It left us wondering why not use us in the first place? I suppose it’s a matter of trust - if you can see it you can control it? Obviously not.

So a silver lining from this virus will be a big push to much more working offsite for a whole range of jobs, after proving that in most cases it works well. Not before time in our opinion.