Today, I’d like to share something most companies would never dare: A cautionary tale of a client we couldn’t help.
You see, a few short years ago, we took on a client who – by all outward appearances – was quite successful.
His tech company was turning over £2.5m a year, he employed more than 40 people and he was on a clear growth trajectory (or so it appeared).
But, like a hot air balloon that had started to run out of gas, his company was secretly struggling to stay afloat.
By the time he realised the severity of the situation and approached us for help, his business was in utter financial distress.
How, exactly, had he landed himself in this predicament, fighting for his financial life when on the outside everything looked like smooth sailing?
Simple.
When he set up his company, he managed his money however he liked. It didn’t really affect anyone else, because he was effectively a one-man-band.
But once he took on a team and started turning over much larger sums, he didn’t change his ways.
Unfortunately, this kind of thing happens more than you’d think…
Business owners moving money around and making purchases whenever they like, without considering accounts payable…
…and without realising how their actions might impact their company.
And the worst part is, there are usually no systems in place to track their spending – or what’s happened to the company’s money.
Without those checks and balances in place, your company is like a ticking time bomb.
When we started working with this company, we quickly built their financial systems, so that their money could be managed efficiently and responsibly.
These systems also ensured that the owner got all the financial information he needed to make better financial decisions moving forward.
The business owner had no idea any of this was possible. Despite turning over millions, when we first met he asked me what management accounts were.
But unfortunately, he didn’t change his financial habits.
He chose to hire specialists when their price tag overran the budget…
He relocated the business to a more expensive office without discussing it with us first….
He withdrew a large sum of money just before Christmas, even though payroll was due to be paid the next day (creating a lot of extra work for us!).
All the while, company payments were bouncing and his debt with HMRC was mounting.
Not a pretty scene!
This client simply didn’t understand that when his business grew up, the way he managed his finances had to grow up, too….
….and sadly, it led to his downfall, because the company is currently in liquidation and he may even be struck off as a director.
But there’s a crucial lesson here for all business owners:
Your attitude toward financial management MUST change as your business grows.
You simply cannot continue with the habits of a small start-up business owner as you scale your operation.
You see, when you’re smaller, you can afford to be more autocratic. You can decide for yourself how to allocate company money…
But, like a child maturing into a teenager, you have to become more responsible as your business expands.
For the sake of the company, your employees and customers, you must recognise that you are part of a larger system – and your financial actions affect more than you alone.
Long story short, you must embrace change, because if you remain entrenched in the old ways of managing your money, you risk everything.
As your business grows, your financials require a higher level of oversight and efficiency.
Otherwise, you could wind up a cautionary tale…
…Or be forced to scale right back down to where you were a few years ago, like other entrepreneurs I know who never changed their financial mindset.
If, on the other hand, your company has hit £1 million or £2 million turnover, and you’re ready to start managing your money just like a corporate does….
….we’re here to help!
Our team at Insight Associates gives you the financial management you need as your business grows.
Get in touch right now to discuss how we can help you.
