Posts Tagged ‘credit control’

So how much accounting do you need and when?

November 18, 2014

Freestone-Webb-certificate-of-incorporationWhen you start up a new business, whether it be a stand-alone, a franchise or a licensee, you won’t necessarily be worrying about when you should engage an accountant and what for. As a franchisee you should hopefully have been provided basic bookkeeping advice and perhaps installed accounting software, either as part of the package or as a recommendation. But you don’t need to worry too much about your final figures until a full 18 months have passed since your ‘Limited’ company incorporation date. There would appear to be a great deal of other things to turn your head to…

After the first eighteen months of your business, you will need to file some accounts and it is probably at that time that you will first consider the need for an accountant. Probably though, the accountant will be contracted only to file your year-end accounts at Companies House and to prepare your year-end tax return to HMRC for corporation tax. Indeed apart from your year- end  accounts and advice perhaps on credit control, payroll and funding, you won’t need an accountant for much else.

 

Another-SpreadsheetAs your business develops and you take on staff; you will hopefully find that you have more time to actually develop and manage the business.  Perhaps you have started to generate monthly spreadsheets which show where your business was in relation to last month, last year etc. Again, as new projects start and the business begins to gather momentum you probably find you have less time rather than more time to monitor those accounting trends and yet bizarrely the need for them grows. Perhaps now is the time to consider the appointment of that first accountant. But wait do you really want to? You don’t mind taking on new staff where you can see that there employment will actually generate income for the business. More sales staff, more warehouse staff, more customer service staff, but an accountant? What part of their role actually helps to generate business for the company? And it is all still about growth isn’t it? Actually perhaps the time when you actually do need an accountant, is when your business enters a stage when perhaps ‘profit’ and not ‘growth’ is the major player. Control of costs and the supply of information becomes critical to decision making and to strategic thinking. Surely now you must employ an accountant?

profit-growth

Actually, you could consider taking one on at a much earlier stage. Who would think that your accountant could actually play an active part in the operation and growth of your business? Could his monthly information packs allow you to make those strategic business decisions in the knowledge that you are armed with the most up to date information possible. Could the analysis of costs help you to recognise that when benchmarked against your competitors you are charging too much for a core product or service? If you adjust the price, could this generate more sales? In this way and many others, your accountant or finance manager becomes a key member of your operational team and he will be knowledgeable too; there are few other staff members with an overview of the whole companies functionality, other than perhaps yourself of course. Small wonder that many Finance Directors take over the reigns as CEO, when the  MD retires…

Of course, your business does not need an accountant or finance manager until it reaches a certain size and that size differs from sector to sector. But information is king and whilst there will be others in your organisation who can provide you with figures; e.g. your Operations Manager or your IT Manager, neither will have a grasp of the whole…  So my advice? Bring an accountant in early and make the work that he does pay for your business…  And consider other options too. Perhaps you can employ an accountant part –time or engage a freelance accountant, to work for you a few hours a month, with the number of hours growing as the business does.

A business is the sum of the people that it employs. You need good sales staff, good operational staff and good processing staff, but despite the lack of importance attached to your accounting in the first few years of your business, you will one day find that your business can not operate at the top of its game without a good accountant… But be wary. One day he may be after your job.

 

 

 

Your franchise agreement – is it all encompassing?

September 11, 2014

franchise agreement Of course it is. Between you, your franchise advisor’s and your franchise solicitor, you have this covered. In  every single way, if your franchisee contravenes the agreement, you have the power (should you choose to use  it) to apply sanctions, remedies or even void the agreement for gross breach of contract.

From my perspective, I am not qualified to comment on the legal minefield that is the franchise agreement. If  instructed to carry out a franchise audit, I will do so on the basis of my client’s instructions and under the  governance of specific terms in the franchise agreement. If I find areas of non-compliance, I will report these  on the basis that their disclosure will allow you to act on any relevant breached terms within the agreement.

Of course, this can be looked at another way… from the franchisee’s perspective.  What if you are a franchisee…

If you are a franchisee and don’t want to lose everything, you need to read, understand and follow the principles outlined below.

Your franchise agreement contains many provisions in addition to those requiring you to do what you are told and pay money to your franchisor on time. You probably never read them, and if you did, you didn’t appreciate what they mean. There are many “boilerplate” (contained in every franchise agreement) provisions that deal with financial transactions, intellectual property protection, ownership and transfer, consents and rights of refusal.

If you forget about these and do certain things that seem perfectly normal in any non-franchise business context, without following the requirements of the contract, your franchisor may declare you in default, and the default will in some instances not have a cure opportunity. You could simply be terminated and lose everything.

You may have done whatever you did that failed to comply with your obligations under these provisions many years ago. They didn’t affect the day to day operations of your franchise or relate to your normal monthly reporting routines. The fact that the franchisor failed to discover the failure to comply until many years later may not excuse what you did or failed to do.

This is an extract from an article written and first published by Richard Solomon on his website: www.franchiseremedies.com. Richard, who is a Franchise Lawyer based in Texas where of course litigation stemming from breaches of franchise agreements is commonplace, (within a franchise market which is considerably more mature than our own), feels very strongly that the interplay of clauses within an agreement should be considered much as one might write a song with various contrapuntal rhythms. The more complete the agreement, the better it is for both Franchise and Franchisor alike. Indeed, Oddly enough it is often franchisor conduct that, notwithstanding the contract language, gives the franchisee an avenue to outmanoeuvre a breach they are purported to have made. Curiously then, if they are aware of their obligations under the agreement and do manage to find a way to contravene it without prejudicing their position, the clauses within the agreement may be worthless. Which conveniently brings me back to my opening salvo: Your Franchise Agreement- Is it all encompassing?

Of course going to the effort and cost of generating full-proof and all encompassing franchise agreements is pretty pointless if you do not know that an agreement is being breached. Suspicions are one thing and within a network of franchisees, there will be those you suspect of breach and those who you do not. Sending in a franchise auditor to look at potential areas of non-compliance need not be costly, particularly if you generate revenue from that disclosed as a result of the process. Indeed, if your franchise agreement, includes terms where on exceeding certain levels of undisclosed revenue determined, this will make the franchisee liable for the auditor costs.

auditDeploying an external auditor, can also send a message your network, clean up your sales submissions and your working practices or else and with current research from the other side of the pond suggesting that 15% to 20% of franchisees are under-reporting sales by 15% or more. As a result, locating and correcting under-reporting behaviour can increase royalty revenues by up to 4% annually.

There are therefore two messages from this:

  • Make sure the franchise agreement is all encompassing
  • Follow through with regular auditing inspections to highlight that you are looking and locate  much needed missing revenue from your network

But I am sure you are all doing this already…

Chris Burton

11th September, 2014

So how do you choose our accountant?

August 6, 2014

Cost? Reliability? Accuracy? Compliance? Speed of delivery?

The temptation of course is to go for reliability and accuracy as your determining factors, with obviously cost as a significant factor and compliance equally important, but a given. Speed of delivery is important, but not the determining factor. Reliability and Accuracy usually sway most towards the high street accountant, the local chartered accountancy firm, whose staff and employees will generate your accounts reliably, accurately and compliantly. What they will do, is follow both the rule of law, ( the companies acts and taxation laws) in strict compliance, and their own governing bodies accounting conventions. There is absolutely nothing wrong with that. In fact, this is the right way (but not the only right way!), the correct way to get your year-end accounting statements prepared for Companies House and HMRC. But is it really what you need?

We are a very important and growing part of UK PLC.

We are a very important and growing part of UK PLC.

The process by which even a small high street accounting firm delivers your accounts is often long winded, not least because of the enforced checks and balances brought about by their accounting conventions, but also because frequently the accounts themselves are generated by junior, often not fully trained staff, whose work needs to be checked and monitored by supervisors and then ultimately signed off by a partner. As I say, all perfectly correct and compliant, but long-winded, inevitably costly and oh so time consuming.

So is there an alternative?

Yes, of course, but you still need to ensure that the fundamental issues are addressed; Cost, Reliability, Accuracy, Compliance and Speed of delivery. Freelance accountants can and do offer an alternative. Most can offer a full year–end accounting service reliably, accurately, inexpensively and promptly and of course compliantly; i.e. delivering accounts in compliance with company and taxation laws. Where they stand out though is in the delivery of that service in terms of cost and speed, but also in terms of actually helping you to run the business, a spare pair of hands if you like, who can help monitor the things you need to be doing, help keep your business costs down and help make sure there is enough cash in the business. They will not be hindered by the incessant checks and balances and the unnecessary and fastidious governance of their accounting conventions. They will probably still pay homage to them, but use them as a yardstick, rather than a brick wall… As a result, they will inevitably be cheaper and they will deliver your accounts to you promptly and accurately.

Probably a bit controversial this. I can just hear the ACA and CIMA, qualified accountants jumping with rage at the suggestion that their service could in some case be inferior to the freelance and often ‘unqualified’ accountant. But that is ok, because on this forum alone, there have been many references to the importance of using a ‘qualified’ accountant, whilst also pointing an unfavourable finger at those who have not qualified professionally. But actually drawing a line in the sand, there is a real point here. There are some businesses, which even in their infancy require a fully compliant set of accounts generated by a chartered accountant and for them as they grow this is the only way. For most others, their businesses, either in their infancy or where will never grow ( by choice or by market restriction) to the point where there is pressure to appoint a chartered accountant and these businesses are better off appointing a freelance accountant. They will save money, expect prompt and accurate accounts and enjoy the benefits of a partner to their business.

It’s about time some someone stood up for the freelance. We are a very important and growing part of UK PLC.

CREDIT CONTROL – it need not be rocket science!

May 10, 2012

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Cash is King…. Especially in 2012… But so is your Client!

With sales harder to come by, the last thing you need once you have delivered your goods or services, is for your clients to hold onto your money longer than they should. You impose credit terms and they exceed them… Is this a familiar story?

How much cash to you actually have tied up in your credit sales? When you pull off a Debtors report, do you have large amounts still outstanding beyond 30 days? Do any of your debtors still have invoices outstanding for 60 or 90 days plus? Of course there may be good reasons for this. There may be queries against these invoices, or the client has not received or processed your invoice; but anything else and you are in danger of losing your money and remember the longer you leave it, the harder it will be to collect.

This may sound like a lesson in basis common sense, but if there is an issue building up in your debts beyond 30 days, you need to jump on it now. Obviously you can resource in house; maybe by asking your accounting or admin staff to send a statement or a letter or even phone the offending debtors… but once this task is done, will the action be followed up and how successful will your collection efforts be?

Using a third party collection agent is an obvious solution. They will set out an agreed collection strategy in advance and will follow the process through to the end. If there is a query noted, they can help you resolve it and if the client does not pay they can be contacted again until the debt reaches the point where further action may be required to collect that debt. As long as they do so within the terms agreed with you and they do not upset your client then everyone is happy… Of course that is frequently not the case. The collection agent may not do a very good job, they may upset your client and you will have forked out a vast sum for collection when the effect has been limited and your client base has been disturbed by bad collection techniques.

Actually good credit control does is not rocket science. At its best it can be effective and affordable and if you outsource, your companies relationship and integrity with your clients will remain intact. Whether it’s a one off campaign or part of a seasoned rational credit policy, outsourcing credit control can be a very effective solution… and usually much more so than conventional in house collection.

We have a very good track record in reducing a customers debt, whilst maintaining a positive relationship with your debtors. Our collection techniques are straight forward, firm and courteous, whether they be in writing, by phone or by other media and refreshingly our prices are amongst the most competitive in the collection industry.

We specialise in collecting B2B debt and have experience across the whole spectrum of industry. We have no formal barriers for who and what we chase either. We can chase one debt for a Million pounds or two thousand  debts for a hundred pounds. And we are successful too: in a typical three letter collection campaign on average we will collect: 60% after letter one, 25% after letter two and 10% after letter three. Then if further action is required we can pursue the matter through the courts to judgement, enforcement and beyond…

And we don’t stop there either. We have the experience and know how to help you establish better collection techniques, if you want to keep it all in-house. We can help you develop a credit policy, help you to establish credit limits and to credit score your new customers. We can help you to establish behavioural credit scores for your existing clients, set up query databases and even help you with the recruitment of good quality collection staff.


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