You may remember me talking about whether your business was robust or fragile a couple weeks ago?
Well, it really took me back to where this whole mission started for me – the company where I learned what good definitely doesn’t look like, and how a basic lack of financial controls and information destroyed a £10m business.
The business I worked for was a furniture manufacturer and retailer, and we had around 70 retail stores around the country in the key shopping centres. From the outside we looked like an incredibly “successful” company with coverage in Retail Week magazine most weeks, and we even featured on The Money Program as a retail success story.
But there was a slight problem. The person heading up the finance team was ME!
I was 22. I honestly didn’t know a debit from a credit, having tried and failed to take A level accountancy. Twice! I just couldn’t get my head round it.
I joined the business when I was 19. Full of drive and ambition to be the next Richard Branson (no sniggering please!) and I just loved everything about business.
We had just 2 small shops in those days and our turnover was around £500k, so not too much to keep track of. We could just about get away with running things based on what was in the bank and I pretty quickly learned to control and forecast cash. (And became something of a demon at it!)
I taught myself Sage and Excel, and sort of worked out how to do everything, in my own way.
As the business grew people were brought in to help me, and I ended up heading a team of 8 finance staff. The business owner made it very clear that he didn’t think accounts added anything to the business and were “just an overhead”, and so would never invest in any skills training or bringing in people who were properly qualified and experienced.
So, I had no one to learn from, and in those days there was no internet to look things up. And the accountancy text books available were like double Dutch to me.
But you don’t know what you don’t know.
I knew the business inside out, and I was a demon at controlling cash but I had no idea we needed company and branch profitability reporting (not that I would have had a clue how to do it) or how to reconcile and control the balance sheet, or understand basic concepts like liquidity.
As the business grew we ended up with 4 companies in the group, the intercompany trading became impossible to keep track of and reconcile, and of course we didn’t have any disciplines, routines or structures in place so things became more and more entangled and confused.
And still no help was forthcoming. Our year end accountants just kept putting the sticking plasters on but never made any suggestions, and our bank astonishingly didn’t want management accounts.
To add to the mix, the MD could be a little volatile. Once I had a full cup of coffee thrown at me across the room because the VAT bill was higher than expected! You soon learned not to be the bearer of bad news and we did our best to manage the incredible level of creditor pressure coming at us from all directions.
And as the over-aggressive expansion came to its ultimate conclusion, having predicted 6 months earlier exactly when I thought we’d run out of cash, I took the call from the liquidator one sunny Friday afternoon. I had to close down the factory, make everyone redundant and tell them there was no pay packet that week, call all the stores and instruct them to close the doors and stop trading, and overall had to make over 400 people redundant.
It’s a day I’ll never forget and I can still feel the devastation. In fact, I feel quite emotional writing this now.
Thinking that it must all be my fault. I’m in charge of finance. It must be, surely?
So, what could I have done differently?
I’ve been over this a thousand times, and honestly, with the knowledge and skills I had at the time I don’t know I could have done anything more. I know exactly what I’d have done with the qualifications, skills and experience I have now, and I’m pretty damn sure that the business would have survived.
What could the business have done?
Recognised that a growing business needs someone who understands finance, knows how to keep control and how to spot when things are growing too fast. Someone who has the experience and confidence to say what needs saying. They could have listened when I asked for help. They could have seen the chaos that was our cash flow and realised something wasn’t as it should be.
I can’t turn the clock back, as much as I wish I could. It was a really special place to work and the experience has literally made me who I am today.
And it gave me my mission – which I pursue passionately every single day. To make sure other businesses have the financial and skills that are critical for a successful business and that this sorry tale doesn’t get repeated.