I met a prospective client a couple of days ago. He is starting a business based on his many years experience and contacts in his specialist field. We met on the basis that he needed an accountant, and could I help?
The word Accountant has become a much overused description of someone who provides financial assistance to a business. Calling yourself an Accountant implies expertise in a wide range of disciplines:
Business Tax (Corporation, CGT, VAT)
Personal Tax (NI, PAYE)
I believe that every business needs all of the above, just not necessarily all at once, or all the time. When choosing someone to be your “Accountant”, are you paying for all the above services “just in case”, or being quite precise about what kind of support you need?
If you manage your business well, you will be able to select when and who provides you with “Bookkeeping” (needed on a regular basis) separately from your “Auditor” (only needed once a year); be able to pay for “Tax” or “Investment” advice only when you need it. You should ask for general support and guidance from a “Finance Director” only as and when you need to.
The various functions of Accountancy can (and often are) outsourced. Accountancy is a big pool with all sorts of fish in it. As a business owner you should dip into the pool only for what you need, when you need it.
Does my prospective client need an Accountant? No. His needs are far more subtle and demanding than a generalist. Are yours?
I had a conversation today with someone about pensions. Now I am not a personal financial advisor, and I gave no advice, but it did make me think about what I do do.
I have been taught that a good Finance Director knows everything, and that a really good one will get everyone else to do it for him (or her). I am not so sure any more. I think a good Finance Director knows how to find out everything he doesn’t know, and that a really good one will help others to do the best they can. After all, a really good Finance Director knows the financial situation, has a good idea of the aims of the business, and a pretty good idea of what every department is trying to achieve. I agree that generally it is up to others to make things happen.
More than any other department, Finance is judged by a very simple metric, is the business performing as well as it can. It’s existance is not about sales, or marketing, or brand awareness; and yet a good Finance Director is assessed on how well the business as a whole is doing.
So what has this to do with pensions? Well, it reminded me that I don’t know everything about pensions, but I do know the questions to ask to ensure the business is compliant. I also know what to ask to see what plans the business has in place to make the most of its staff and goals to see if it is as successful as it can be.
A good Finance Director is good with numbers; a really good one knows what questions to ask. How good your business is depends on how well you can answer the questions.
At a breakfast meeting this morning, the excellent speaker said that there were three things that were good at travelling globally:
She was talking about the charity she worked for, but made a compelling case for the involvement of all businesses and individuals to get involved.
The world we live in is no longer restricted to those we live next to. Our next door neighbours now live across the globe.
Our success (individual and corporate) depends on the well being of those we live with. As we hope to be looked after when things don’t work out, it is our responsibility to look after those less fortunate than ourselves.
How do we know who to help?
The message is: find out who you can best help, and get involved…
A good management accountant is worth their weight in gold. Not because they will generate sales, or improve your PR, but because they will keep you focused on what is really important to the long term survival of your business.
It doesn’t matter whether you are a sole trader, have a turnover of £100k, £100M, or are the Chancellor of the Exchequer, the same principles apply:
Create Key Performance Indicators that are relevant to, and understood by, all those involved – and don’t just focus on the financial KPI’s. Take advice on KPI’s, you need to be objective.
Identify what KPI’s are leading indicators, and which are lagging indicators.
Use qualitative and quantitative measures. Ask for suggestions, and not just from those within your organisation.
Be aware of how KPI’s affect people, and how change makes them feel.
Know the difference between making an investment, and incurring an expense.
When the world around you appears to be losing its way, make sure you have someone who is prepared to talk to you about the reality of your financial priorities.
I gave a presentation to a business-networking group this week on the subject of Social Media and Business.
Realising the audience was at best sceptical (with a couple of exceptions!), and at worst cynical, I used the following images.
Plain website = shop window, hopefully directing you to the door in.
Blogging on your website = shop front glass now removed, allowing you to talk to potential customers, and for them to talk back (for example by leaving comments).
Social Media (such as Twitter, Facebook, and LinkedIn) = you have left your shop and are walking about sharing your ideas, and encouraging others to talk about them as well (not always with you present).
It is a bit blunt, but seemed to get the key messages over:
Social Media is not something that only happens online – it’s a mesh of physical meetings and online activities.
Ideas that are spread through groups of people are far more powerful than ideas delivered to individuals.
Real engagement is when people do things for you that you didn’t ask them to.
Learn to lose some control – in return for greater reach.
I found myself despairing today, about the lack of interest in the Balance Sheet by some businesses. I believe it is the single most important piece of information every business needs. Why?
Look at it this way, as an individual, we tend to know how much we owe other people, how much we own, even how much we are owed. It’s nice to have sense of how much we are earning, but the bit that gives us the warm fuzzy feeling of stability – or the cold shivers of concern – is the detail of where we are financially right now.
That’s what the Balance Sheet is. It’s a snapshot of who owes you, who you owe, and what you own.
As a barometer of your organisation’s health, check out the Balance Sheet. And if you want an idea of what shape you are going to be in, then ask to see the Balance Sheet’s forecast position. It’s not rocket science, and could save you from some very unpleasant surprises.
Great question raised this morning at the Birmingham Social Media Cafe – “Do you value your time?”
It sparked an interesting debate about the perceived value of your time. Do you give it away freely? Do you calculate free-time in terms of lost opportunity? Is your time worth more or less to you than to your clients?
In a service sector, time is what I sell. If I am not charging for it then by default I am giving it away. How much can I afford to give away before I start to devalue it?
As ever, it’s a compromise. I need to give a bit away to “show what I’m selling”. The time that I choose to invest in networking needs to have some ROI.
I was reminded today that time spent with some people is priceless.
I have been pondering a number of issues over the Christmas period to do with the power of positive thought. As I was starting to compose my own blog, I was pointed towards a great article by Jon Cooper (founder of JupiterDawn.com), published in the Birmingham Post on 1st January 2009. Serendipity strikes again…
I’ve been isolating myself from pessimists for as long as I can remember. As soon as I feel a negative “vibe” from someone, I always make a mental note to be in a different room next time they’re around.
That particular skill is one I’m calling on more and more these days, as finding people without the doom-bug can be quite tough.
One thing which hasn’t changed with the economic climate is pretty much a fundamental law of the universe. Whether or not you believe some of the more spiritual stuff preached by Dale Carnegie, or in recent publications such as “The Secret”, it will always be an irrefutable fact that you get back what you put out.
If you think negatively, you will get negative results.
Even more obviously, if you say and do negative things at work, those around you will mirror those words and actions, producing a spiral of bad outcomes for your business.
The fact is, thriving in 2009 is far from impossible; here’s my 3-point plan to ensure that you keep your plans on track when others are falling off the rails.
1 – Review which of your goods or services are selling best, and focus on making those even more attractive.
Pricing, features and delivery can usually be tweaked if you look closely enough.
Conversely, consider dropping whatever isn’t selling well or making you a profit.
2 – Use PR to get your message to the market cheaply, and ahead of the competition.
Standing out from the crowd as a fashionable, desirable business can cost less than you imagine.
Newspapers, TV and BBC Radio offer great opportunities for entrepreneurs to broadcast interesting, recession-busting stories.
3 – Banish negativity from your business. If suppliers are talking doom and gloom, agree with them and get better prices and longer payment terms.
If customers are whining, find out what it would take to make them happy again.
If staff or colleagues are getting you down, re-arrange your office so you don’t have to listen!
In summary, identify the key success factors which made your business great in the past, promote them and focus on them, whilst eliminating waste and negativity.
I know 2009 is going to present some brilliant opportunities; make sure you are set up to grab them with both hands!
Another subject that is covered by a thousand books, prompted by a business running an on-line shop selling stylish products for the home and garden.
Assume a marketing spend of £1,000, how much of this should they spend on getting past customers to come back, and how much on finding new customers?
My view was a split of about 20:80, with the majority of spend on finding new customers. The type of products on sale are not daily purchases (think Christmas, birthdays and special occasions), so customers may come back, but maybe only twice or three times a year tops. To me, the key to driving revenue up is to find new customers.
How do you allocate your marketing and advertising spend?
The dust seems to have settled on media speculation about VAT – just how many sexy headlines were they ever going to come up with anyway?
So what should you be doing to make the most of the change?
Number one, now is the time to make large purchases, such as computers and other goods and services that have a high cost. The reduction on VAT should mean that they will cost you less. Don’t forget to haggle on price as well.
Number two, check your purchase invoices from suppliers. Make sure you are being charged at the lower rate of 15%.
Number three, check the sales invoices you are issuing. If you can justify making a supply at the old rate of 17.5%, then use it.
Number four, take proper advice if you are unsure what to do. Behind HMRC’s PR is an army of folk whose job it is to collect tax.