Services

Think of it this way: If your business can run without you, generating all the income you could ever need, while continuing to increase in value, why would you ever want to sell it? This would be like selling the goose that lays the golden eggs… you would employ a General Manager to run the business for you.

Also bear in mind that for 50% of us, the time and manner of our exit—the day we cannot work every day in and on our business—is NOT under our control. Health, death, family, disputes, and a number of other events outside of our control are likely to dictate the timing, and if you have not prepared for it, the manner of your exit.

One of the most critical systems/processes will inevitably be related to the Financial Controls you use to ensure the efficient operation of your business from a financial perspective, which is essential if you wish to maximise profitability, cash flow, and the value of the business.

A serious potential buyer will insist on receiving Management Accounts plus the Statutory Accounts for the last three years. Management Accounts are very different from the typical Profit and Loss Statement and a Balance Sheet.

To put together a robust Management Pack that incorporates all of the key information needed to make informed decisions is a significant undertaking, and one that requires the appropriate level of financial expertise and insight.

Building the pack should always be a joined-up process that involves all key members of your management team, and it needs to be led, or at least supported, by a competent Finance Director/Chief Finance Officer.

If this is what you need, then the Inspired FD/CFO service is exactly what you need—all the benefits of a full-time FD/CFO on a part-time basis, making it much more affordable and accessible.

Every business is unique, which is why we would need to fully understand exactly what your situation is and your requirements to agree on an appropriate ‘Scope’ before we can confirm exactly what you would need from our Inspired FD/CFO service. In summary, we can provide you with everything from the most junior member of your accounts team up to and including taking the role as your Inspired FD/CFO.

Whilst each engagement will be unique, the core activities and phases can be broken down as follows:

1. Review of Bookkeeping and Financial Records and if necessary, Rectification of any issues.

As the saying goes, rubbish in—rubbish out, and in the vast majority of cases, the current level and quality of the bookkeeping is woefully inadequate. This can be broken down to 5 key reasons summarised as follows:

1. Fixed and Variable Costs not being correctly posted: Variable costs are those that change with varying sales volumes, whereas fixed costs don’t change regardless of fluctuations in the sales volume. If these are not correct, any attempt to understand profitability will fail at the first hurdle. But also on the topic of profitability…
2. Recording Revenue and Related Expenditure in the same period – cost accounting: If sales are recorded when made, and costs are recorded when the supplier invoices are added to the accounting system, it is impossible to accurately track profitability from month to month. While it will stabilise in the long run, it becomes impossible to know if you are trading profitably or making a loss in the short term—and you need to be able to respond quickly when things are not right.
3. Journal Adjustments not correctly reflected in the accounts: This frequently happens if your accountant extracts the data from your accounting system, makes adjustments before filing your year-end accounts, but does not accurately reflect the adjustments in your bookkeeping system. In this case, your management information and the information submitted to Companies House are at odds, and you don’t have an accurate starting point.
4. Accounts Not Reconciled Up To Date: This is frequently an issue and needs to be addressed so you have a good understanding of your starting point because the ramifications are similar to 1c above.
5. Consistent Posting of Income and Expenses and Correct Allocation: This frequently happens when the bookkeepers don’t know what they are doing, take shortcuts, or struggle to get adequate direction from management.

Long story short, this is back to where we started—rubbish in—rubbish out, and it has to be addressed before you can expect to be looking at a true picture of financial performance.

2. Analysis, Strategic Planning, Forecasting, and Scenario Planning.
   

The process of building a plan for your business can be quick and easy, taking just a few hours, if the foundations are correct and you know exactly what your projections are. For a more complex business, especially one forecasting properly for the first time, it can frequently take days and be spread over several months.

Strategic Planning: The Management Team will ideally work through your Strategic Planning Process to agree on a high-level plan and objectives (Your What), and then assess the growth potential from existing customers, products, and services, cost of sales and overheads required to deliver the high-level plan (The How), and finally, customer by customer, key manager by key manager, agree on the detail (The Who), all of which distils into the Profit and Loss part of the Forecast.

At the end of the process, you should have explored all of the main options and scenarios to identify the most appropriate growth strategy that is articulated in a detailed Three-Way Forecast:

1. Profit and Loss: This is both the easiest part of the process, and the most difficult and time-consuming, because if the top line (sales) and the cost of sales are not correct, then everything that flows out of this is rubbish.

Your profit and loss projection needs to be sufficiently detailed to be able to map cash flow and profit movements on a month-by-month basis for the first two years of the forecast, with years 3, 4, and 5 in years, because no one can guess what will happen in detail three years from now.

1. Balance Sheet Assumptions: The Profit and Loss projection must be rolled forward from a known and accurate starting point. These are your ‘Opening Balances.’ With appropriate guidance from Inspire as your FD/CFO, we can apply appropriate assumptions for each of the key Drivers that will impact your Balance Sheet and Cash Flow projections.This allows you to project your Balance Sheet forward to know exactly what assets and liabilities you will have at any time during the forecast period.
2. Cash Flow Projections: Sales are Vanity, Profit is Sanity, but Cash is Reality. You may have plans for super profitability, but if you run out of cash, it will all evaporate, and if you use the cash you have inefficiently, you will be missing out on profit opportunities. So your Cash Flow Forecast is possibly the most important part of your forecast.
3. A Funding Proposal can be generated from the Forecast if it is necessary to secure capital to fund your selected plan. This is either an integral part of the Inspired FD/CFO service, or it can be worked on as a separate project.

Armed with a robust Three-Way Forecast, you can now proceed to build your Management Pack.

3. Building the Management Pack.
   

Agreeing on the exact contents of the Management Pack will inevitably be a discursive and iterative process that unfolds over time, but in broad terms, the steps can be outlined as follows:

• Your Forecast forms the basis of your financial reporting, which is why it is important everyone buys into and agrees that your plan is achievable. Wherever possible, key members of the Management Team need to be involved in building the forecast every step of the way.
• The Management Team needs to be educated on the structure and contents of the financial part of the Management Pack to ensure they understand and can use it effectively. In practice, this will evolve over time. In the meantime, the Management Team will need to agree and incorporate non-financial KPIs to make up the Management Pack.
• Non-Financial Key Performance Indicators (Lead Indicators): There will inevitably be several critical parts of your overall operation that also need to be monitored. These are the input drivers that must be controlled, because at the end of the day, the financial data is simply your ‘Score Board’ to report outputs or outcomes.

Agreeing on exactly what your non-financial KPIs are, the targets to set, and how to measure and track performance will be the subject of debate, but ownership and responsibility will be down to the various functions and department heads to report on.

Wherever appropriate, your non-financial KPIs will need to be overlaid with the corresponding financial information they drive, be that revenue, cost of sales, or overheads. This will require discussion to agree on the optimum way to track and report, but once concluded, non-financial KPIs will need to be incorporated into your overall Management Pack.

• Departmental Updates: Over and above the numbers (financial and non-financial KPIs), to ensure efficiency, departmental heads will need to provide a concise and considered overview and summary of the key issues fellow managers need to be aware of.

Without these departmental updates, management meetings will inevitably become less efficient and more ineffective than would otherwise be the case because executives will inevitably deliver a verbal update that is poorly thought through, frequently containing too much inconsequential information, resulting in wasted time, and/or miss key information that management needs to be aware of.

With all the above in place (something that is likely to take some time), Inspire as your Finance Department can do any or all the following as part of the regular monthly reporting process:

• Update your financial data each month to report your performance versus target.
• Remind/chase your departmental heads to provide their quantitative and qualitative reports/updates.
• As well as requesting the report updates to share with other heads of department…
• This is holding to account/a reminder for whatever tasks are outstanding.
• Any items for inclusion in the agenda for the upcoming management meetings can be requested.
• A reminder that the non-financial KPIs need to be updated to feed into reporting.
• Liaise with you as the MD/CEO to agree on your agenda for management meetings.
• Collate your Management Pack and Agenda for you to approve before…
• Circulating the Management Pack to all Managers.
• Attending and supporting your management meetings.
• After the meeting, drafting the Minutes and circulating them with a request for ‘points of accuracy’.

4. Attending Management and Strategic Planning Meetings
5. Ad Hoc Financial Support for you or your heads of department wherever required.
6. In Quarter 4 – Repeat the Planning, Forecasting Cycle to Agree and Update the Plan for Next Year.