Turning on the Lights

It’s a familiar situation. Small or medium sized business with an experienced and knowledgeable owner and director who had the good sense to employ a reasonable bookkeeper. The accountant isn’t bad either. Only sees him once a year but at least he knows the end of year accounts are fine. Don’t want any trouble with the Inland Revenue.

But it’s not quite enough and he can’t put his finger on the reason why. He has this feeling that one department in the business isn’t performing and might even be losing money. Without giving up a weekend and spending the time rooting through hundreds of invoices he can’t be certain whether he’s right or not. On top of this one of his employees is nagging him for a pay-rise saying sales have increased in their department. Does the profit they earn the business warrant it? God knows!

Now that computerised accounts packages particularly Sage are so widespread this situation is very common. It shouldn’t be.

One director we worked with said he felt that a light had been turned on when his management accounts were rearranged. The other directors were always arguing between themselves about certain aspects of the business. Neither side could prove their case so nothing was ever done. They still argue but their arguments are much better informed and they always end up with a decision being made. They see the accountant more as well. His work at the end of the year has reduced but they see him during the year to discuss results and new ideas. Sometimes he just acts as a referee between them but its always constructive.

Profits are up as well. Nothing dramatic but they realised how well one department was doing so they took on another member of staff to capitalise on it. They have ceased doing one particular type of work having found that the profit just didn’t cover the administration. With six weeks of the year to go they are meeting the accountant to discuss ways of keeping this year’s tax bill down. He has already explained that some of his ideas can only be done before the year-end.

It sounds ideal but surely it’s expensive? An extra member of staff will be needed to produce all this extra information. Wrong. By spending some time with the directors a good accountant will find out what they want and by improving the way information is input, have these reports coming out of the standard accounts package automatically.

Some things are more fun in the dark. Business isn’t one of them.