Imagine this scenario…
Your company relies heavily on a client who forms a substantial portion of your revenue.
One month, that client informs you they will be late on a payment because they are waiting for external funding, which is currently delayed. They’ll need another eight weeks to settle your invoice.
What would you do?
From a commercial perspective, it might be tempting to continue working with them. This client is longstanding, and losing their income could pose a significant setback. Your sales director may pressure you to overlook this delay in the interest of maintaining what has been, so far, a lucrative relationship.
However, from an accounting perspective, extending credit for such a prolonged period is a risky move.
Delayed payments can severely impact your cash flow, making it increasingly difficult for you to meet your financial obligations. If the client’s expected funding fails to materialise, you could be left with a substantial unpaid debt that may have to be written off.
This situation illustrates the classic conflict between commercial interests and financial — or “accounting” — interests. They are not always aligned!
While commercial interests focus on revenue growth, client retention and maintaining strong relationships, accounting interests prioritise the long-term financial health and sustainability of your business. The sales director may favour huge deals or preserving a key client relationship, but from an accounting standpoint, it is essential to maintain cash flow, minimise risk and secure long-term profitability.
Ignoring red flags, such as delayed payments, can lead to cash shortages, unpaid debts and heightened financial risk, potentially destabilising the company—even if the allure of short-term gains is strong.
Now, as an accountant, you might expect me to argue that accounting interests should always take precedence.
But the reality is that building a healthy business requires a balance between the two.
There is no definitive right or wrong in this scenario. What matters is having a thorough understanding of the financial risks you’re undertaking, so you can make informed and sensible decisions. You need reliable financial data and projections to fully grasp the implications if things go wrong. What will the impact be? Can you afford it?
If you decide to take those risks, you should do so with your eyes wide open, knowing the necessary steps to mitigate them.
The challenge is that many businesses lack this balanced view.
Often, the accounting team is excluded from commercial decision-making, leaving business leaders with a one-dimensional perspective—the sales team’s viewpoint. Risky decisions can take on their own momentum, leading to catastrophic results.
On the other hand, if you leave all decisions to accountants, you may never take any risks, as my tribe tends to be naturally risk-averse. That can strangle your business too.
But that’s where Insight Associates comes in.
As your financial management partner, we bridge the gap between accounting and commercial interests. We aim to help you build a healthy, growing, and profitable business by integrating both perspectives.
When we meet with you, we’ll make sure you have clear financial data that lays out the consequences of your decisions. And we’ll evaluate the risks associated with them – together with the potential upsides – so you can make well-rounded, confident choices.
If you think you would benefit from that kind of advice and approach, please get in touch with me today.
Simply email garry@insightassociates.co.uk or call our office on 01279 647 447 to find out more about how we can help you grow faster, and maximise your profit.
Warmly,
Garry
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