Imagine you knew for certain exactly what was wrong with your finances and you had a clear plan to fix them.
That’s what you get when you put your business through a financial health check. Remember last week I talked about being brave enough to face your financial reality?
So I thought it would be useful to share the most common problems we find during our health check day.
Number 1 – accountants
Hands down, the undisputed winner is bad service and advice from the accountant. You wouldn’t believe the things we find (or maybe you’re the unhappy recipient of bad service and know just what I’m talking about).
Looking at the last few health checks we’ve done, we found:
- Last year’s accounts not correctly reflected on the accounting system so the business looked far healthier than it really was.
- R&D claims not being suggested or made, costing several clients tens of thousands of pounds.
- VAT returns not filed and /or not reconciled.
- Bank accounts not correctly reconciled.
- Debtors in such a mess credit control was difficult.
- So-called monthly accounts with massive mistakes.
- Bad bookkeeping done by junior staff sent by the accountant.
- The bare minimum year end service with no support, no suggestions, and no proactive advice – just take the money and run.
The problem is that companies tend to trust their accountant. And if they don’t know they’re not getting the service they should it can cause real financial difficulties. So, if you suspect you’re not getting the advice you should, it’s worth getting a recommendation from someone you trust (or you can ask us) and get a second opinion.
Number 2 – weak bookkeeping skills and poor financial information
Most bookkeepers in small business are self-taught; we don’t often see bookkeepers with accounting qualifications. And the automated bookkeeping industry perpetuates a myth that you don’t need to understand anything, ‘the system does it all for you’.
But this isn’t true. Anyone tasked with looking after your finances has to understand what they’re doing. Dabbling in finance without real knowledge can be disastrous for a business.
Luckily this is an easy fix, as we have a program to train book keepers in the key skills to make sure your books are always correct!
We see business owners struggling to make decisions, plan their future and keep control of their business with frustratingly limited and incorrect financial information – usually nothing more than the profit and loss the accounting system kicks out. Whilst this is better than nothing there are couple of problems with it:
- Because the book keeping often isn’t correct, any information on these reports won’t be accurate.
- These reports are too simplistic to give you the 360 vision you need to have real control of your business and be able to plan your future.
Number 3 – no financial plan
We find this in almost every business we work with. Sometimes we find a budget for the year (not very often) but nothing beyond that. It’s hard to plan your business if you don’t have a longer term financial strategy for yourself and your business. Once you get a clear vision for your personal financial future, you get incredible clarity around what your business needs to do to deliver it.
Not knowing where you’re heading beyond the end of the year means you’ll live in reaction, not taking control of what you want to happen.
Leaving aside the other missing key controls and risk areas we uncover, these alone are enough to make sure your business doesn’t work financially.
So if you’re trying to work out what to look at first then these 3 areas are a good place to start.