Monday, 19 January 2015

Preparing for the audit



On February 2nd 2015, my 6th eBook: Accounts department - Advice for business owners and finance managers will be published for ipad, iphone and kindle and will be available from amazon.com. This blog entry is a sample from the eBook. There are 20 topics like this one covered in the eBook. 


One of the busiest times of the year is the year end and the annual audit. Good preparation for the auditors makes a big difference to the time they take and the amount of disruption suffered by the finance team and management. As audit fees depend on the time spent, anything you can do to help the auditors be more effective should reduce the fee they charge. Here are five things you can do:


1.    Agree a realistic and detailed audit timetable that you and the auditors can commit to. Ensure that key members of staff are not absent on leave during the audit.

2.    Ensure that the timetable allows sufficient time for you to have finalised the trial balance and draft accounts before the auditors arrive. It can be very expensive for them to audit a “moving target”.

3.    Compile an audit file for the auditors containing copies of all relevant documents and information. The auditors should supply you with a schedule of the information they require.

4.    Arrange for a member of senior management to spend some time meeting with the auditors and showing them around the office, shop or factory. This will give the auditor a wider perspective of the business.

5.    Once the audit closing meeting has finished and the accounts are finalised, don’t delay in having the financial statements signed by a director and the auditors. If you delay, the auditors will have to make further checks before they are prepared to sign the accounts.


Frequent and open communication with the auditors can make all the difference to their efficiency.


You should be meeting the auditors before they finalise their audit planning process. At the meeting advising them of important events or issues encountered during the year will help them to plan their audit.


Arrange to meet the auditors periodically during the course of their fieldwork. Use the meeting to update each other on progress and issues arising so that surprises are not stored up until the end of the audit.


Your staff should make themselves available to answer audit queries they should pay particular attention to ensuring junior auditors understand the responses provided to them.


The post fieldwork audit review will generate further queries. If you delay in responding to these the audit team will have moved on and the cost of their dealing with your response may increase if more senior staff have to be utilised.

Use the closing meeting to explore ways to jointly improve the efficiency of next year’s audit process.


As a first step, why not pick the phone up and call John or email him and arrange to meet up. 

John's website is: http://www.nomizon.co.uk 

 His credentials: http://www.linkedin.com/in/johntoppin

Tuesday, 30 December 2014

Profit and loss forecasts

 

On January 2nd 2015, my ebook: Financial management - Advice for business owners and finance managers will be published for ipad, iphone and kindle and will be available from amazon.com. This blog entry is a sample from the ebook. There are 20 topics like this one covered in the ebook. 



Budgets and full year forecasts perform very different functions in business. The budget is a financial translation of the company’s business plan. A full year forecast is the best and most current view of management on how the current year’s financial performance will turn out and should always be compared with the original budget.

A budget, once set for the year should not usually be changed or flexed unless the business is changing its plans.

In volatile market conditions a business should be preparing forecasts at least once a quarter if not on a monthly basis. The full year forecast should comprise the year to date actuals for each elapsed month with a forecast for each line item for each of the future months of the year. 

The full year forecast should form part of your monthly management accounts report and be a source of data for your cash flow forecasts together with your balance sheet.
Remember to involve your sales team in developing and verifying the numbers you include in the sales forecast. However, be appropriately prudent in your review of projected sales figures provided by the sales team.

Cost forecasts should be easier to produce than the sales forecasts. Certain costs, for example cost of sales and other direct costs can be modeled from their relationship to sales levels. Ensure that you take account of loss of volume discounts due on materials if you are forecasting lower cost of sales purchases. If you import goods and materials for processing ensure that your forecasts take into account up to date exchange rate information.

Salaries and wages are normally the largest overhead cost. Forecast these on a person by person basis. Prepare a staff cost forecast model in excel by person and department based on your payroll data. This will enable you to produce “what if” scenarios where you believe that more or fewer employees will be required in future months.

For your other overheads identify those that are fixed, for example rent, those related to the level of activity, for example telephone, and those that are discretionary, for example training and  prepare your forecasts for these accordingly.

Revise your full year forecasts each month and compare the prior month’s full year forecast to the latest so that you can assess any changes, for example, sales continuing to fall or unit materials costs continuing to increase.


As a first step, why not pick the phone up and call John or email him and arrange to meet up.

John's website is: http://www.nomizon.co.uk 

His credentials: http://www.linkedin.com/in/johntoppin

Wednesday, 24 December 2014

What will the new year bring for you? - Making it happen.



As you find time to contemplate this year gone and think forward to next year, here are some questions to help you.
  • What am I most proud of this last year?
  • What have I learned?  What are our clients learning? (Can I ask them?)
  • What would make next year really great? (at least three things)
  • Why are these things important to me? 
  • What support would add fresh thinking and impetus? 
  • What excuses am I making? How can I be more accountable?
  • As well as strategy, what behaviour changes do I need to make?
Planning moves you from wishful thinking into action.
1. It helps you define a sense of purpose.
2. When you make a plan (however imperfect) you are creating your future and not acting as a hostage to fortune. 
3. You might just make those decisions that otherwise you keep putting off. 


With many thanks to John Niland.


As a first step to improving your business's fortunes, why not pick the phone up and call John or email him and arrange to meet up.

John's website is: http://www.nomizon.co.uk 
His credentials: http://www.linkedin.com/in/johntoppin

Thursday, 4 December 2014

Lease or purchase?



On December 8th 2015, my ebook: Corporate finance - Advice for business owners and finance managers will be published for ipad, iphone and kindle and will be available from amazon.com. This blog entry is a sample from the ebook. There are 20 topics like this one covered in the ebook. 


Purchasing a fixed asset is only an option if you have sufficient funds available to you, otherwise you will need to look at some form of lease or hire purchase. 

Under hire purchase, the business will own the asset once all of the payments have been made. You will also be able to claim capital allowances from the start. With a lease, the bank buys the asset and you refund the bank over time plus interest. Your company might never own the asset. In this case, the bank will claim the capital allowances.

You will be responsible for maintaining and insuring the asset whether or not you buy outright, under hire purchase or lease so don’t forget to tell your insurers.

If you have the cash or you need to own the asset outright from the start then buying might be the best option but you also need to take into account your growth, the type of business you run and your business plan.

Purchasing an asset may use up funds that the business needs to finance working capital. Prepare a cash flow forecast to make sure you will still have enough money to run the business. Purchase is a good option if you don’t want to tie the business in to long term agreements.

Leasing is clearly better for smoothing cash flow. What else could make a difference?

·      Ask the bank whether they obtain volume purchase discounts on asset purchases they may be able to share these with you.
·      Ask for the flexibility to upgrade the equipment during the lease, especially for high tech equipment.
·      Ensure the lease agreement is clear on what happens at the end. For example, do you have to return the equipment of can you extend into a secondary period for a lower sum?
·      If you already own an asset and need access to funds, don’t forget to look at sale and leaseback as an option.
·      If you are comparing the lifetime cost of purchasing, versus leasing the asset, don’t forget to take into account your cost of capital.
·      If the future is uncertain or you have a fixed life business, then lease assets over a shorter period.

Never buy or lease more assets than you actually need just to take advantage of a good deal.

As a first step, why not pick the phone up and call John or email him and arrange to meet up.

John's website is: http://www.nomizon.co.uk 

His credentials: http://www.linkedin.com/in/johntoppin

Friday, 28 November 2014

5 steps to a business plan that you can actually use





On December 2nd 2014, my third ebook: Planning and budgeting - Advice for business owners and finance managers will be published for ipad, iphone and kindle and will be available from amazon.com.

 A good business plan drives the business towards its specified goals by addressing activities, accountabilities, resources and timescales – within a framework of explicit assumptions. 
1. Focus



The business plan should focus on how the company will maintain and improve the existing business as well as any new initiatives.



More detail does not equate to better budgeting accuracy and the same applies to the business plan. Passing the sense check and covering key elements is more important.

  

2. Strategies and objectives


The best business plans set key short and long term objectives and outline strategies for accomplishing these.

Some hints: 

  • Business plans should link activities and actions to the strategies so that you are able to measure the actions and the results of those actions. 
  • Actions usually involve resource and cost so this will help you to ensure that the budget reflects the plans.
  • Answer questions such as where do we want the business to go, how will we get there and what is the fall back plan if things don’t work out as expected?
  • Use a SWOT analysis to identify the key activities that the plan needs to address.

3. Measurement


The activities and actions included in business plans should be mensurable so that you can monitor the level of success in achieving them.

  • Measurements do not need to be financial only. For example a goal could be improved sales via the activity of investing in customer care and customer feedback can be the measure for customer care. 
  • Time line the activities and actions so that you can budget them by month.
4. Responsibilities


Assign responsibilities and accountabilities to the planned actions so that you can empower people, measure performance and can reward them for success.



Ensure that all staff allocated with responsibilities in the business plan are involved at some level in producing the business plan.


5. Risks and assumptions


Good business plans address risks, including the risk that the underlying assumptions become invalid. 
  • As well as identifying risks plan for activities and responsibilities for mitigating those risks. 
  • Check that the business plan is affordable.
  • Run scenarios so that if results fall below set criteria the business is able to respond. For example, if sales fall below £Y in region A the alternative plan is to consolidate that geography with region B.

What is stopping you?

As a first step, why not pick the phone up and call John or email him and arrange to meet up.

John's website is: http://www.nomizon.co.uk


His credentials: http://www.linkedin.com/in/johntoppin