If you were trying to figure out whether you could afford an extension on your house, what kind of information would be more useful to you…
A summary of how much money you made and spent around 12 months ago?
Or a carefully calculated forecast of how much money you’re going to have over the next 12-18 months?
The answer is, of course, “both”. To make a well-founded decision about how to spend your money going forward, it’s useful both to understand where you’re coming from – and where you’re going.
This goes to the heart of an issue I’ve been discussing in my last few emails…
Namely, why your existing accountant is never going to be as “proactive” as you might like.
You see, “regular” accountants look at how your business has performed in the past. They prepare last year’s accounts, file last year’s tax return and balance last quarter’s books.
Most of that is work that is required by the law. It’s not there to help your business, it’s there to fulfil statutory requirements.
And because it’s backwards-looking – often referring to events that occurred months or even more than a year ago – it has relatively limited use for your business.
That’s why your accountant really isn’t equipped to proactively suggest improvements to the way you manage your money, or how to invest going forwards, or which products and services to cut or to expand. Their data is basically out-of-date.
It’s like making that decision on your extension based solely on your payslip from the end of 2021. It wouldn’t make sense, would it?
Our model is very different.
We believe it’s necessary to understand your financial past. The very first thing we do when we work with you is explore in depth what’s been going on in your business financially to date, giving us that essential context and clarity.
You see, very often businesses don’t actually have a clear idea of what their finances have looked like in the past, despite all those annual accounts and tax returns – which are really just top-level summaries. It’s critical to get this sorted so there is a solid foundation for future decisions.
But because we act as your finance director, our real emphasis is on looking forward.
Once we have that clarity on the past, we can start preparing your cashflow forecasts so you can see how much money you’ll have in the bank over the next few weeks and months. We prepare budgets, working out the best places to invest in the future. We talk to you, the business owner, about the financial decisions you face.
And we prepare monthly management accounts, which give an accurate picture of your financial situation right now – not last year.
It is these elements which allow us to be proactive, because we are constantly thinking ahead about what’s about to happen financially in your business (not just preparing reports for HMRC).
And it gives us the data necessary to:
>> Ensure your cashflow is smooth, so you never run out of money
>> Maximise your profitability
>> Keep expenses tight
>> Grow revenue
>> Invest in the right places in your business
The problem is, it’s unreasonable to ask your regular accountant to take this forward-looking approach, which is usually well outside their remit. And it’s not what you’re paying them to do.
If you really feel the need for a proactive accountant, it’s a sign you’re ready for the next stage of accounting services, with an approach to your financial management that is far more hands-on, anticipatory and actionable.
That’s exactly where we come in. “Proactivity” is our business model…
Then hit ‘reply’ to this email or call me on 01279 647 447 to arrange a no-obligation chat about how we might be able to help you.
Warmly,
Garry
