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Credibility is more important than likes

Thu, 01 Jun 2023 07:54:23 GMT

In today's fast-paced, ever-changing world, it can be difficult to know who to trust when selecting a supplier. Social media has given rise to a world of noise, where anyone can post anything, and it can be challenging to know what is true and what is not. As a result, credibility has become more critical than ever when selecting any supplier. In this article, we discuss the importance of credibility, the challenges posed by social media noise, and how to identify credible suppliers.

What does credibility actually mean? It encompasses sincerity, integrity, authenticity and reliability but fundamentally it is based upon trustworthiness and expertise. It is a combination of both emotion and logic.

Credibility is a critical factor when selecting a supplier because it determines whether you can rely on them to deliver what they promise. Making the wrong choice can lead to delays, quality issues, and inevitably financial losses. For example, selecting a supplier based solely on their social media presence can be risky because social media noise can make it difficult to know what is genuine and what is not. In today's world, anyone can post anything on social media, and it can be challenging to separate the truth from the noise. As a result, businesses need to be cautious when using just social media to select suppliers. There was a recent news story about an accountant who had hundreds of 5 star reviews based upon getting massive tax refunds for their clients. It transpired that the refunds were fictitious and HMRC subsequently demanded the refunds back together with interest and penalties leaving those taxpayers with massive debts and long repayment terms. The accountant denied any responsibility and ignored any communications and requests for help.

One way to ensure credibility is to look for reliable third-party evidence. For example, has the supplier won any industry awards or hold recognized professional qualifications or perhaps a referral from another professional you already know and trust? Independent endorsements by the supplier’s peers provide a level of reassurance not provided by online reviews. Formal qualifications not only provide evidence of expertise but also ensure adherence to standards of behaviour. The accountant mentioned above was not a chartered accountant and therefore not subject to the rigorous oversight of a professional body.

Another way to ensure credibility is to research the supplier's track record including their length of experience. Whilst new suppliers may have recent technical skills learnt from college or university, they will lack the practical experience that comes from working with many clients over many years. For example, a more experienced accountant is likely to have seen a wider range of financial issues and developed a deeper understanding of the unique challenges businesses face especially in regard to surviving recessions. So, you ask how long a supplier has been in business, and what is their experience? This information can be found through online searches, industry publications, or by speaking with other businesses in your industry.

Don’t forget to consider the supplier's financial stability. A supplier that is financially stable is more likely to have the resources to deliver on their promises. Consider their financial statements, credit reports, and any other relevant financial information to ensure they are financially sound. We often see advertisements claiming to be able to achieve amazing results yet when you check their own accounts at Companies House they are often insolvent. If they cannot get their own house in order how can they achieve those results for you.

It is also important to evaluate the supplier's communication skills. Do they respond to your inquiries promptly and professionally? Do they communicate clearly and effectively? A supplier that is responsive and communicates well is more likely to be reliable and trustworthy.

There is a lot of discussion over recent years that you should consider the supplier's values and ethics before doing business with them. Simon Sinek’s view is we don’t buy what a supplier sells, we buy why they sell it. We like to understand our supplier’s “purpose”. Whether you believe that or not asking questions about their culture, codes of conduct or ethical guidelines will ensure that you feel comfortable in dealing with them. So choosing a supplier that aligns with your values and ethics can help ensure a long-term, mutually beneficial relationship.

Finally, it is important to evaluate the supplier's level of innovation. In today's rapidly changing business environment, it is crucial to choose a supplier that can adapt to changes and innovations quickly. Consider their investment in technology and R&D.

In conclusion, credibility is essential when selecting a supplier, particularly today where social media noise can make it difficult to know who to trust. By looking for third-party endorsements, researching track record, evaluating financial stability, considering their values and ethics, and assessing their level of innovation, businesses can ensure they select a supplier that is reliable, trustworthy, and can deliver on their promises.

What's in it for me?

Wed, 26 Apr 2023 09:46:34 GMT

“What’s in it for me?” is a marketing concept which essentially describes what your prospect considers before buying your product or service.

I probably heard this first in the late 1980’s from a client who was in marketing, and it has always stayed with me because in helping me design my first brochure he made me consider words such as approachable and jargon free rather than just tax returns and accounts preparation. In other words, I needed to explain the benefits of my service to the reader rather than the features of what I did.

Is it now redundant as a concept given that everyone wants to be seen as caring and considerate to others? Or is it more relevant given the greater consideration of protecting one’s mental health?

Being a bit cynical I see giant corporations trying to convince us that they are caring and are thinking about us rather than themselves. They talk about their Corporate and Social Responsibility and then continue to pollute the planet or make thousands redundant without any further concern. On the other hand, we also hear positive stories (if the media let us) about individuals who genuinely think of others before themselves so presumably do not consider WIIFM.

Unfortunately, this makes WIIFM sound like a very negative trait. But being realistic WIIFM is a simply a longstanding human emotion. It’s probably an inherent caveman notion of protecting oneself from danger, acquiring food and clothing to help us live longer, give us a better chance of finding a mate etc etc. Perhaps nothing has changed at all other than the assets we feel we need to have to support those same goals in the modern world.

One major change today is that we are hearing more and more about protecting our own mental health and our need to consider our own wellbeing first. This is absolutely right we should be more aware of our mental health but it does mean that we are being encouraged to always consider “WIIFM” first before anything else despite the fact that in reality helping others makes us feel good and improves our mental health. In fact being busy helping others gives us no time to stress over our own problems (at least temporarily).

Thinking about time brings me to the consideration of the costs we need to consider when thinking about WIIFM because it’s never just money. It could be time, energy, feelings, values and beliefs. What’s in it for me if I commit to spending x amount of time on something? How much energy will I expend in a pursuit of something? If I go for that run, I know I will be tired. What emotional impact will it have? Will it have a positive impact on me or a negative one? Will I feel invigorated or exhausted? Will I feel proud or disappointed? Those who help others are definitely considering WIIFM because they recognize the positive emotional charge they receive.

And sorry for being a typical accountant but we also need to consider the “opportunity cost”? For every pound spent this is money that could have been spent on something else. For every hour spent that’s an hour which could have been spent elsewhere. And where do you direct your energies? It’s all about making a choice, considering your options and making a decision as to where you should “spend” your limited resources. The older we get the more we realise how limited our resources are. WIIFM helps us spend wisely.

Perhaps we can conclude that WIIFM is a natural trait and in fact a very good one.

So finally let’s go back to marketing which is where we started. If all you talk about are features no one is interested. Take accountants as an example. All accountants look the same don’t they. They just prepare accounts and do tax returns. Therefore, the only differentiator must be price, isn’t it? Well actually even the process of preparing accounts and tax returns can be different. Some accountants take the time to “think” about you and your business and question your figures and others just blindly accept them with the obvious cost difference because they are spending less time. WIIFM to have an accountant who thinks about me and questions my figures? Would you prefer to sleep better at night knowing that if HMRC launches an investigation they will find less errors? That you will neither overpay nor underpay tax. That when you come to sell your business the due diligence will not uncover any issues that will allow the purchaser to demand a price reduction and destroy your plans for a comfortable retirement.

Be proud to consider “What’s in it for me” for every element of your life and use it to ask lots and lots of questions until you are certain you are getting exactly what you want.

Peter Disney named Top 10 Business Advisor of the Year in global awards.

Thu, 23 Feb 2023 16:36:28 GMT

Peter Disney, chartered accountant and managing director of Wood & Disney, has been announced as Top 10 Advisor of the Year in the Helm’s annual global ranking of independent accountancy and business advisors.

This award from financial software company, Helm, celebrates the hard work of advisors around the world, including those that are reshaping what it means to be an advisor and helping their clients to grow, succeed, and thrive. The judging panel, which included senior representatives from Sage, Xero and Intuit QuickBooks, considered all nominations based on their client experiences, successful outcomes and how they are innovating client service and delivery.

Confirms Peter Disney, “To receive the news that we are one of Helm’s global top 10 advisors in their latest awards is quite a shock! The judging panel included representatives from the world's biggest cloud accounting software companies and so to be recognised by such big names in the accountancy world is a huge achievement.

“While general accountancy and tax services are a major part of what we do, a significant aspect is the support and guidance we provide to ambitious entrepreneurs. We do not focus on a specific industry rather a specific attitude of the owners; those who are motivated by building a better future for family, team and community, and who wish to last at least 20 years - representing less than 10% of firms registered at Companies House. To be recognised not just mine, but the whole team’s approach to supporting business owners succeed is an amazing boost for 2023!”

Discussing Peter’s nomination, Kelvin Gieck, Helm Co-Founder said: “It’s been inspiring to read so many applications and hear some of the amazing things advisors are doing to support their clients. Having personally reviewed Peter’s nomination, his success is centred around business-focussed goals, rather than "filing on time". This resonated with me as I know how important this is to business owners, but often ignored by professionals. Peter also shows an amazing balance of utilising tools and tech yet realizing that they are just tools at the end of the day and that clients value a trustworthy advisor with human, face to face advice.”

For more information on the Helm Top 10 Advisor Awards, visit: https://www.takethehelm.app/ .

Wood & Disney’s mission is to provide clients with proactive financial support and business advice to ensure their long term success and give them the time, confidence and freedom to enjoy their business and family life.

The team passionately believes that a successful business owner needs Real Time Financial Information that is dependable and accurate, and structured business advice and support to help guide business owners with strategic decisions.

Together Wood & Disney builds long term partnerships with its clients, giving them the advice and support they need to achieve their dreams and ambitions.

The Future First Business

Fri, 05 Aug 2022 09:24:00 GMT

According to Companies House (Companies register activities: 2021 to 2022 published 30.06.22) the average age of UK Companies was just 8.6 years. Only 27.9% were over 10 years old and only 10.1% were over 20 years old. Given that there are over 4.7m private limited companies compared to under 6,000 Public Limited Companies the failure rate must be predominately within the private limited company sector. Why do so few of these businesses survive into the long term?

There are lots of reasons given for business failures some of which may be unavoidable such as a dramatic market decline or supplier issues caused by an unforeseeable global event. However, many of the reasons given are probably preventable such as customers failing to pay on time, competition driving down prices, over borrowing, over dependency on a small number of customers or suppliers, an obvious long term market decline, excessive expenditure perhaps caused by too rapid a growth spurt. All of these perhaps could have been mitigated by a mindset of building for the future rather than for current gratification. I totally agree with author and speaker Brian Tracy when he said: “The ability to discipline yourself to delay gratification in the short term in order to enjoy greater rewards in the long term, is the indispensable prerequisite for success.” This is why I support the idea of a “Future First Business”.

What does a Future First Business look like?

In simple terms it is a point of view. Always asking the question before making a decision “will this strengthen my business in the future” and if the answer is no then seriously consider not doing it.

The result will be a business with a stronger balance sheet, higher credit rating, more cash reserves, greater resilience to downturns (or full blown recessions), and a business which will support you and your family into the very long term. Inevitably it would mean the business is more attractive to a potential buyer.

Most reasons given for business failure are preventable, but the business owners’ mindset needs to change. Do you want to be just another statistic at Companies House or do you want a business which breaks the norm?

Your Journey To Freedom is powered by wood and disney chartered accountants. The business was established originally in 1975 with Peter Disney joining in 1987. The switch to a limited company occurred in 2003 with Brendon Howlett joining Peter in 2013.

We are a “Future First Business” and intend to still be advising our clients long into the future.

Why should you focus on controlling the cash you already have?

peterd@wood-disney.co.uk (Peter Disney) — Tue, 20 Jul 2021 12:04:01 GMT

Historically, investors, financiers and of course accountants have viewed the holding of too much cash as inefficient, lowering the return on assets and increasing the cost of capital. Their attitude is that cash is just another asset which needs to be managed for maximum profitability, so cash represents money not being put to work. It has also been encouraged that borrowing helps a business to grow faster especially when interest rates are low as they have been over the last ten years.

This article is not the place to go into the detailed calculations used by finance people to support this view that low cash is good cash but as a general rule if your business generates a profit of 10% on it’s net assets and your cash only generates 0.25% then your cash is theoretically losing 9.75%. Now, no business wants to operate with zero cash so financiers play with some other ratios to prove that perhaps you can still operate with minimal levels of cash savings. These are referred to as Liquidity ratios and solvency ratios. In essence as long as the economy ticks along and your customers pay you just before you need to pay your suppliers then happy days.

Sadly, since April 2020 we have seen both the permanent closure of some businesses and many others who have been forced to borrow huge amounts just to survive. Borrowings which are likely to take up to ten years to repay if they manage to keep going that long. Thoughts of retirement or the money to achieve personal goals and ambitions have been completely destroyed.

What could have been done in hindsight and what can be done for those businesses struggling today?

In my view I think a lack of basic financial knowledge has caused these misfortunes and I am not talking about complex theories and ratios used by accountants but good old-fashioned prudence. The prudence I learnt from my mum not from studying accountancy. Shortly after my mum married my dad 67 years ago she discovered that he couldn’t budget so she took control of his weekly wages (in cash) and had separate envelopes for all of the various costs she knew she would have. The rent envelope, the food envelope, the clothing envelope etc. Everything was calculated to ensure she didn’t overspend in one area to the detriment of another. They lived within their budget and even though my father worked in a factory all his life they managed to save a deposit to buy a house and all because of my mother’s careful cash management.

I seldom see this prudence when new clients come to see me. They are much more focused on having greater income today rather than building an asset for tomorrow. But it is the focus on building an asset for tomorrow which would solve the reoccurring failures during recessions which seem to appear pretty regularly every ten years or so but few businesses prepare for these. Perhaps it’s because if you look at statistics from Companies House in 2019 72% of companies were under 10 years old so had never traded through a recession. Is this lack of preparation for the inevitable one of the reasons why the survival statistics for small businesses is so awful? Think about it. Less than 28% of businesses survive more than 10 years and this statistic has not changed in decades.

Our vision is “To defy the norm of Business failure statistics and help 100% of our clients not only survive more than 10 years but to create a genuine asset to pass on to another generation” .

A recent review of our client base showed that the average age of our company clients was 13.8 years and that over the last five years their balance sheet values had increased by over 250% and that is after the shareholders had taken their dividends. This proves that our focus on building their asset bases leads to greater resilience and longevity compared to the norm.

We can do this because we have a structured system, a framework of inter-related processes created over the last 30 years, to strengthen the foundations of a business so it is more resilient and less likely to fail, to optimise its current resources enabling it to grow with certainty and to transform it into an asset which can support aspirations. This unique system is called Your Journey to Freedom®.

It is not just another business coaching system but instead is a pragmatic, best practice process for established businesses where the owner has either reached a plateau and is struggling to grow further or has exploded with growth and is fearful of losing control.

Within Your Journey to Freedom® we have a specific program focused on helping our clients become more cash prudent called the Strategic Cash Retention Program® and as you can image this has been used extensively during the pandemic.

How do we charge for our services?

Fri, 05 Mar 2021 14:33:05 GMT

Pricing both accounting and advisory services is complicated because both people and their businesses are complicated. You are unique and the way you run your business is unique so it would be unfair of us to charge you a “standard price” unless you want a “standard” service but who defines a standard service?

We are advocates of clear and transparent pricing and to achieve that we have a systematic (mathematical) approach to our calculations and do not use vague expressions like bronze, silver or gold services with “from” in front of various £xxx which we all know means it will cost you more than initially claimed. We price (yes we call it what it is rather than “your investment”) based upon the services you actually need, the precise service level you choose, and logical factors about your business such as size, number of staff, number of transactions and our clear and objective assessment as to the quality of your record keeping. One of the benefits of being a cloud accounting specialist is that we can really, very accurately, assess the quality of your record keeping, scoring you from very poor to awesome. Naturally, awesome bookkeeping will see significantly lower accountancy fees than very poor. We should point out that the only clients who score awesome are those with qualified accountants in charge of their accounts department. Most of our clients can achieve “good” or “very good”. We do have two grades above “awesome” but those are reserved for clients who either have us doing their bookkeeping or have us preparing their management reports which as you can understand means the annual statutory accounts are faster to complete because we have already dealt with any issues during the year.

We do not want to deliver a basic accounts service. Known as basic “compliance” it is applicable if all you want is someone to file your accounts with HMRC and Companies House but then we are probably not the firm for you. We aim to provide a full finance support function to our clients enabling them to focus on their businesses yet have all the financial insights that will enable them to make better decisions. Better decisions will lead to greater success, more profits and more positive cash flow.

Compliance services are historic. They show what you have done and are a basis for calculating your tax liability. Your history is fact and therefore the resultant tax liability is fact and cannot be changed retrospectively. Again, our clients want more than just to be told what their tax liability is at a point when they cannot do anything about it. Our services can therefore include tax planning both business and personal in advance so that you do have the opportunity to do something about them.

Business owners will often tell us that they want business advice but have no idea what that means. Do you just need someone to answer your questions when you have them? A simple yes or no answer delivered by email? Well, a robot can do that. Or do you want real support and real advice from a human who has seen it and done it? Many accountants call themselves business advisers but when pressed they either cannot explain what they do or what they offer is an unstructured meeting with a vague outcome. Our business advisory service is a pragmatic, best practice process called Your Journey To Freedom® the result of decades of learning and experience by our directors. www.yj2f.co.uk You will notice that it is a registered trademark and is unique to wood and disney. To us business advisory is to strengthen your business to create a stable foundation from which to grow, to optimise your performance to ensure controlled progress and finally to transform your business so it is not dependent on you therefore giving you freedom . We do not claim to know everything and part of our system is to signpost our clients to appropriate experts and specialists depending on what they truly need at any particular time.

We meet our clients at least quarterly, often monthly, to track progress, to make decisions and set new goals. We’re deeply committed to that. So, for our advisory program we will only work with clients who commit to a minimum of quarterly meetings with us.

If you are an ambitious entrepreneur who wants to build a better future for yourself, your family or your community then contact us to arrange a discovery call.

E: info@wood-disney.co.uk

T: 01206 233170

Why is a cashflow forecast a complete waste of time?

Fri, 05 Feb 2021 09:49:57 GMT

I confess to have written in the past about the importance of a cash flow forecast but for many businesses it genuinely is a complete waste of time.

Let’s look at an example of a start-up business.

It buys its products from a supplier and initially will not get a credit line so has to pay up front. It puts those products up for sale or uses them in its service. There will be a time delay between paying for the product and eventually selling it. But then as a new business it may need to offer credit to its customers so there is a further delay. In the meantime, more product needs to be purchased. In order to assess the cash flow gap between paying for its products and selling them an understanding of the potential cash required can be established with a cash flow forecast. As the business grows this “gap” is sucking in more and more cash which is either filled by borrowing from your bank or by retaining profit. The more profitable the business the more likely it can finance this gap from its own resources. Eventually an equilibrium is reached when the cash coming in from previous sales is more than enough to pay for the products being purchased today.

So, a business which has been establish for let’s say more than three years is likely to have reached that equilibrium and is probably paying off previous debt and is achieving positive cashflow. The problem is that this positive cash flow is seen as being available for the business owner to spend and that’s what tends to happen. A cash flow forecast at this point merely reinforces the belief that it can afford the business owner’s other needs for cash whether that is more employees, more equipment, bigger premises or more dividends. And generally, as long as the business continues on a steady trajectory, it manages cashflow fine. Obviously, if a recession (or a pandemic) hits the economy then this upsets everything but does a cash flow forecast help if the business has little or no reserves to fall back on? It may help obtain a loan but that is just storing up problems for the future. If that cashflow forecast says you can’t actually repay that loan when the repayments start is that really helpful?

Most business owners are not financial people which I suppose is why accountants love cashflow forecasts but business owners only see what they want to see. Therefore, business owners need something more than a cash forecast into the future. They need guidance today about what they should be putting aside in savings for the regular downturns that will happen in the future. As a business owner you have a responsibility towards the future success of your business and the safeguarding of your teams’ jobs in the future too. You can only do that if you strictly control your cash and target to grow your reserves. A cashflow forecast does not do this. Benchmarking with a target percentage of profits going into specific savings accounts is far more useful.

The Strategic Cash Retention Program™ provides these targets in a simple monthly review and helps your business become more resilient in the future. 2020 was an exception year of generosity from our Government but in the real world you need to build up your own reserves to survive.

Are you putting aside a proportion of your profits each month to guarantee your long term survival?

Why should it be such bad practice for a business to hold cash in reserve?

peterd@wood-disney.co.uk (Peter Disney) — Thu, 28 Jan 2021 10:50:38 GMT

Historically investors, financiers and of course accountants have viewed the holding of too much cash as inefficient, lowering the returns on assets (ROA) and increasing the cost of capital. Their attitude is that cash is just another asset which needs to be managed for maximum profitability, so cash represents money not being put to work . It has also been encouraged that when there is a booming economy borrowing helps a business to grow faster at the same time as interest rates are likely to be lower. However, when boom turns to recession this increased debt can spell big trouble.

To understand efficient use of cash let us consider this idea that it can lower the return on assets by looking at a simple example.

A business has £1m of net assets on its balance sheet of which £200,000 is in the bank. It makes a net profit after tax of £100,00 which includes £2,000 of interest.

Overall, it is making a 10% return on its assets of which the interest received represents just 1% return on the cash. In theory by eliminating the cash the Return on Assets would be greater so let’s try it.

The company distributes all the cash as a dividend to its shareholders reducing the net assets from £1m to £800,000. Its interest income would disappear leaving £98,000 of net profit after tax. £98,000 as a percentage of £800,000 is 12.25% so an improvement on its previous return of 22.5%.

How does this fit with the idea that it is increasing the cost of capital?

Well taking the same numbers as our ROA example we know that the business can generate 12.25% return on its net assets but its return on cash is only 1% so in effect the company is losing 11.25% on any cash it holds. This is known as the opportunity cost of cash .

Obviously, no company wants zero cash because it needs money to pay its debts and trade successfully so what is the optimum amount of cash to hold?

Again, finance people look to other ratios the most common being the liquidity and solvency ratios .

Liquidity ratios monitor a company’s ability to pay its short-term liabilities whereas
Solvency ratios look at a company’s ability to manage all of its debts including long term finance.

The two main liquidity ratios used include the current ratio and the quick ratio .

The current ratio is calculated from the following: Current ratio = current assets / current liabilities

It is used to evaluate a company’s ability to pay its short term (current) debts from its short-term assets. Ideally it needs to be at least 1.0 but lenders often prefer to see 2.0 which means that the business could pay its creditors from realising only 50% of its current assets. Obviously, a score of less than 1.0 indicates that the business doesn’t have enough liquid assets to settle its liabilities.

The quick ratio is calculated from the following: Quick ratio = current assets minus stock / current liabilities

The q uick ratio is similar to the current ratio, but excludes needing to sell its stock to pay its liabilities. So again, a ratio of at least 1.0 is important.

Two of the most popular solvency ratios include: debt to equity and debt to assets ratios .

Debt to equity compares total liabilities to its total share capital and reserves. If the total liabilities are significantly higher than the equity (more than 2.0) it means the company is “highly leveraged” and therefore is at greater risk.
Debt to assets compares total liabilities to its total assets. It shows the percentage of total assets being financed by creditors as opposed to being financed by its own equity.

None of these in isolation conforms whether a company is holding enough cash, but it generates a conversation amongst the directors and its advisers and that is the important factor.

So what are the benefits of retaining cash in your business?

Let us assume the directors have agreed to increase their reserves and retain more cash to protect the future of their business (and their employees) despite doing so may make it look less efficient in the eyes of external financiers or investors, however there is still another potential problem.

The impact of tax on retaining cash.

I am not talking about a simple increase in tax because the money is not being spent because to be honest if you look at it logically it is like holding a 20 pence piece in one hand and a pound coin in the other. You need to spend the pound to save the 20 pence so unless spending that pound seriously benefits the business it is cheaper to pay the tax. No, it’s more serious than that. It is possible that holding too much cash can redefine a trading company into an investment company with the potential tax consequences for Capital Gains Tax and Inheritance Tax. There are even rumours that our Chancellor is considering taxing the shareholders of close companies (those with five or fewer shareholders) on their undistributed reserves (i.e., your cash) as if they had been voted out as dividends. This will not encourage businesses to be careful with their cash and save for the next rainy day. Please take note Mr Chancellor.

Retaining cash to build financial resilience and stability

Despite all of society’s pressure to spend rather than save, to avoid taxes and borrow rather than use our own money I think businesses will be looking to build their resilience and think more about safeguarding their futures. I foresee that in the future employees will be checking to see how financially stable their potential employer is, and customers will be looking at their suppliers' balance sheets more closely too especially when they may have been let down or lost money in the past by going for the cheapest option. Foregoing the greatest return on assets by deliberately holding multiple months of wages and directly strengthening reserves will actually be better for the long-term future of a business.

Growth without considering Strategic Cash Retention will become foolhardy.

Why it is important to get "it" done now rather than leave it until next year?

peterd@wood-disney.co.uk (Peter Disney) — Wed, 06 Jan 2021 09:19:34 GMT

Do you recall back in December we were seeing people posting on social media... “will be glad when 2020 is over and looking forward to 2021”? Like somehow things were going to get better as if by magic on the 1st January. Even in December with the clearance of the first vaccine for use it was obvious that there was little chance of normality until at least the spring. This was confirmed on Monday evening when our Prime Minister announced a lockdown likely to last for at least seven weeks until the vaccines have a chance to protect the most vulnerable.

As business owners we cannot afford to simply do nothing for that length of time and potentially a lot longer.

It’s pretty obvious that we cannot expect our government to solve all of our problems and even if they could, not as quickly as we would like. As entrepreneurs and business owners we have always fought to create a better life for ourselves and our families and accept that we are generally unappreciated by our government for the jobs we create and the substantial taxes we pay. This has been further proven by the total lack of support in the last nine months for small company owners who remunerate themselves by using dividends.

So, regardless of what’s going on in Government or in the world generally, we need to ignore what’s outside of our control, and instead focus on what’s within our control, which is.... what are we going to change in the way we do business to ensure that we not only survive but thrive?

This starts with asking ourselves some questions.

• What changes did Covid force you to make in 2020 which have actually benefitted your business?

• Have you put into place new systems and processes to continue doing these great things?

• How can you become even better and more valuable to your customers in 2021?

• What opportunities are presenting themselves which you may have otherwise missed in the normal daily grind of work, but which have stood out because of Covid 19.

• What would you have to do to double your revenue this year? (Think big and not just in terms of an inflationary increase).

• What’s holding you back? And for this one you really need to be honest. Is it you? Do you need help?

We created our business advisory program “ Your Journey To Freedom ” long before Covid struck with the objective of Building Better Futures for our clients. Using this philosophy, we now apply this program to help businesses which are facing difficulties because of what happened during 2020.

In summary, there are three key steps to successfully navigating your journey to freedom.

It starts with helping you to STRENGTHEN your business and personal finances by giving you a secure and stable foundation from which you can grow.

We move to the second level where we help you to OPTIMISE your businesses to create a sustainable, resilient and growth focused future which is secure, under control and delivering consistent profits and cashflow.

The final level helps you to TRANSFORM your businesses to ultimately not be dependent on you, but instead to have the team and systems in place to achieve your freedom.

If you would like to know more about Your Journey To Freedom packages please contact us.

Why is advice an investment rather than a cost?

peterd@wood-disney.co.uk (Peter Disney) — Fri, 11 Dec 2020 16:37:16 GMT

We know from conversations we’ve had with clients, the biggest thing that puts people off joining Your Journey To Freedom is the financial investment.

After all, you may be thinking you can probably get access to the sort of information we’ll be sharing, for free, and while that may be true, here’s the problem: you’ve had access to that information for years. YouTube has been around a long time. So has Google. But, you've not done anything with that content.

Why? Because there is too much of it and its too confusing. Each search delivers millions of results. Depending on what you open you get conflicting messages and differing advice. And of course is that information provided by authors who genuinely know what they are talking about themselves? Do they have real experience or are they just repeating other stuff they have read elsewhere?

Think about this analogy . You have bought a book on mushrooms and go to your local open space to find mushrooms for breakfast. Your book may have pictures but some edible mushrooms look surprisingly similar to poisonous ones and you are naturally uncertain. Would having an expert come with you who not only can tell the difference but will sit down and have breakfast with you?

The fact is there’s much more to Your Journey To Freedom than content. The people who are delivering it are experts who know the difference between what will work and what won't.

So, we are confident you’ll get tremendous value from the wealth of knowledge and information which we can deliver.

Is your business growing fast but you're running out of cash?

Tue, 11 Feb 2020 10:34:27 GMT

The following is an extract from a recent article on accountingweb.co.uk.:

“Typically, the small business facing a cash flow shortfall will only confront the problem within a week before it hits them, and spend just one hour researching finance providers. Four out of five of them approach only one lender”.

WHAT???

Actually I have two WHATs???

Firstly the typical business owner only knows he needs a cash injection a week before the cash crisis hits?

Secondly only approaching one lender and by the way that is likely to be their existing high street lender?

So let’s look at the first one: Only knowing that a cash injection is needed a week before the crisis!

That is a stunning admission. How would that business owner’s employees feel to discover that the reason they haven’t been paid is that their boss didn’t look far enough ahead to spot a problem and rectify it when with a bit of forethought it could have so easily been sorted. Given that in theory over 3 million employees in the UK are only one payslip away from homelessness (Shelter 2016) that boss by failing to plan ahead has potentially caused an employee to lose their home.

This lack of planning, or perhaps lack of understanding of the impact of trade today on the cash flow of tomorrow, may have been unavoidable when we used notched willow sticks or abacuses or even hand written ledgers but not when we use real time bookkeeping systems such as Xero and QuickBooks. No excuse for not issuing sales invoices as soon as the job is done. Automatic chasing of sales invoices, automatic collection of money by direct debit. Automatic posting of supplier invoices and expenses and the setting of payment dates. We know so much more today about what is happening in our businesses and more importantly when it’s going to happen. Given all of this why do business owners still “write up their books” monthly or even quarterly?

However having these systems does not take away the need to think and plan ahead. Cash flow forecasting is easy in theory but hard to get right in practice. A cash flow forecast looking 12 months ahead is probably a complete waste of time unless you have a consistent seasonal trend. A 28 day rolling cash flow forecast is infinitely more useful but difficult to get right because a single day’s delay in a receipt makes a massive difference to the results.

So where is this leading to?

There are two inevitable future events which will impact on you.

1. Recession – every ten years or so and regular as clockwork (almost). But in every downturn there are always winners as well as the losers. Cash flow forecasting and ongoing monitoring enables you to see when the issues are coming and cut your costs earlier.

2. Rapid growth – it’s difficult to say no when opportunities present themselves and you suddenly experience rapid growth. But more sales demands more working capital to support those sales and more businesses go bust through lack of cash than from lack of profit. You are much more likely to need more cash when you grow than when you stagnate. Cash flow forecasting allows you to see ahead to where the strain points will occur and allow you to plan accordingly.

So this leads nicely to the second element of the accountingweb.co.uk article: One hour of research and still go to a high street bank?

Have you asked a high street lender for a business loan recently? Do you realise just how much information they demand and how long they take to reach a decision? Certainly far longer than a week!

There are always alternative solutions to this issue BUT all lenders both traditional and new Fintechs will want to see up to date Management accounts both P&L and Balance Sheet. Last year’s accounts will no longer cut it. The fact that you maintain a cash flow forecast will also help you. Lenders are looking for you to prove that you have your finger on your business's pulse. As far as they are concerned out of date accounts shows dis-organisation and a lack of control. Admitting that you didn’t realise that you were about to enter a cash flow crisis doesn’t create a great impression either.

Summary

If you want to still be in business in 10 years’ time you need to think of the following:

1. Your financial records need to be updated DAILY .

2. You need a 28 day rolling cash flow forecast .

3. Think ahead and ensure extra finance is both planned and budgeted for well ahead of the time when it is needed.

4. Shop around early to get the best deal.

Will advice in the future be from a robot or a human?

Tue, 14 Jan 2020 09:14:15 GMT

Back in 2015 the BBC wrote an article called “Will a robot take your job?”

Sadly, when I typed in Accountant it revealed that there was a 95% chance that my job was being replaced by automation. Bookkeepers and payroll clerks came out worse at 97%.

In reading further, the result assumed that as logical thinking ‘numbers’ people then obviously this type of work could be replaced by technology. However interestingly jobs requiring empathy or creativity were less prone to automation.

Do accountants seriously have such a boring reputation that they are perceived as having little or no empathy or creativity?

Looking back at my early career I have always been interested in technology in helping to grow my business even back in the days of using accounting software on floppy disks. Every time there was a jump in the use of technology I was there. Through the 1990s I was playing with databases to streamline workflows particularly for business advice. I even built an online business diagnostic tool in 2002 called Plus4Business. It flopped spectacularly which at the time I blamed on a lack of broadband but later I realized I had been kidding myself. Wood & Disney was also the first firm of accountants in East Anglia to go paperless in 2003. And we first started using cloud accounting in 2008 long before many of our competitors. From this you can see that as far as I was concerned technology was the holy grail never believing I was supporting a monster that would one day destroy my profession.

So, we come to today. Am I still a geek who loves all things technology driven? Well yes and no. I do believe that Bookkeepers and accountants focusing solely on compliance will disappear. Xero and QuickBooks are both moving rapidly towards “less human involvement” in bookkeeping using machine learning to recognize the corrections being made by bookkeepers and accountants and dealing with them before we even spot them. A simple case of using our expertise to copy and replicate what we do. QuickBooks has already said that it is changing its DIY model for a Do-It-With-You (DIWY) model. The increase in profits by moving from a £20 per month service to a £200 per month service is a massive incentive, don’t you think? So that’s bookkeepers disposed of so what about accountants? Well Xero has bought a tax compliance system which is not great yet but with accountants using it and suggesting improvements it can only get better to the extent that it will be offered direct to business owners. Accountants shooting themselves in the foot yet again.

So, is this the end of the accountancy profession too? Well of course not for a few reasons. Firstly, business owners are not trained bookkeepers so they will make mistakes which the software cannot correct. We will therefore still be required to carry out forensic assessments of records and make sure they are accurate. That old almost forgotten audit training will finally start to pay off. Secondly, many business owners will simply prefer to concentrate on what they do best and hand over the bookkeeping to someone who is trained and can do the job far better. Lastly, we are still required to act as translators because so many business owners have limited understanding of their numbers and need someone to paint a picture of their performance in a language they understand. Hang on a minute is that empathy showing up?

So, is that it then? Of course not. If you think this is just about an accountant preparing a set of accounts, you are completely missing the point. Of course, business owners need to comply with tax legislation, but they don’t just select someone to prepare a basic set of accounts. Most business owners accept that they do not have all the skills to run a successful business so select their accountants for their ability to advise them on all the other aspects of running a business. So, the real question is can AI offer this advice as well as the basic compliance stuff.

I used to believe the answer was yes hence why I developed Plus4Business 18 years ago. Today I look around and see yet more AI driven advisory systems appearing on the market. The holy grail of automatic success driven by technology. Fill in an online questionnaire and every issue can be resolved. Your business is no different to any other. One size fits all. You can take short cuts, quick fixes, dramatic growth in a matter of days and no hard work at all. Just follow a system.

My attempt to create an online business advisory system didn’t flop because of a lack of broadband but because it took effort. Effort to understand and effort to use. The same applies to today's systems. We all struggle with a lack of time so to use that valuable resource to research, learn and use is just too much effort. That’s why humans will always be required as advisers. As advisers we provide expertise. As mentors we provide experience and as accountants we hold our clients to ‘account’. I think my mission is to stop business owners thinking about the word ‘count’ within accountant. That’s suggests our only value is adding up and subtracting but there is so much more we can do.

Why is it important to cut costs the right way?

Wed, 31 Jul 2019 15:48:38 GMT

“My dear young friend,’ said Mr. Micawber, ‘I am older than you; a man of some experience in life, and – and of some experience, in short, in difficulties, generally speaking. At present, and until something turns up (which I am, I may say, hourly expecting), I have nothing to bestow but advice. Still my advice is so far worth taking, that – in short, that I have never taken it myself, and am the’ – here Mr. Micawber, who had been beaming and smiling, all over his head and face, up to the present moment, checked himself and frowned – ‘the miserable wretch you behold.”

“I say,’ returned Mr. Micawber, quite forgetting himself, and smiling again, ‘the miserable wretch you behold. My advice is, never do tomorrow what you can do today. Procrastination is the thief of time. Collar him!”

This wonderful excerpt from David Copperfield by Charles Dickens summarises the biggest problem when cost cutting. People will talk about doing it but for very important reasons never actually get around to it. There is always a good reason why they put it off. A new sales push, problems to solve, people to meet… just no time. But if you are going to succeed in a serious cost cutting exercise you must take the time to do it properly and thoroughly.

Ok so you have decided to get started but where do you start? The first thing you must do is to identify what your real costs are and exactly when they occur. How do you do this accurately? You could analyse your bank statements but these can be more confusing than helpful. Your expenditure leaves your account over a number of different time periods such as weekly, monthly or even annually. When are these expenses supposed to leave your account and when do they actually leave your account because this can be very different? Looking at your bank account in isolation will not give you a full picture of your costs.

So why not look at the accounts prepared by your accountant? Surely these must be an accurate reflection of what is going on? Well not necessarily. The profit and loss account is likely to cover a twelve-month period and therefore seasonal trends are hidden. Income and expenditure may be higher or lower at different times of the year and you need to know exactly when these occur. Your profit and loss account statement also generally only includes tax-deductible expenses but there may be other costs you are incurring which are not being shown. Consider the hire purchase or loan costs on that car or piece of equipment you need. Only the interest is shown in the profit and loss account. The capital repayment is to be found reducing the liability on the balance sheet.

There may be other items of expenditure, which appear on the balance sheet instead of within the profit and loss account. Fixed asset additions appear on the balance sheet and only depreciation appears in the profit and loss account. The depreciation seldom reflects the actual costs as the depreciation rates can vary from 10% to 33% depending upon the asset type. Don’t forget some annual costs could occur both at the beginning of a year and at the end, so could be counted twice or not at all.

So as you can see, identifying what your real costs are is not that simple, and you need to spend time right now in preparing a detailed cash flow statement on the basis of moving forward without cutting costs, to give you the likely picture if you do nothing differently. The purpose of this cash flow statement is to increase the pressure on you to cut costs so although when preparing this cash flow analysis you want to be as accurate as possible, if you have to make an estimate make sure it overestimates the likely cost. You need to see the worse possible scenario if you continue to spend at the current level. This will increase the “misery” and make you commit to cutting costs in order to survive.

“My other piece of advice, Copperfield,’ said Mr. Micawber, ‘you know. Annual income twenty pounds, annual expenditure nineteen (pounds), nineteen (shillings) and six (pence), result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

Ok so lets assume you have prepared your cash flow analysis for the coming year. Notice I have not called it a cash flow forecast because you are going to make fundamental changes to your costs before you convert it from an analysis to a forecast. Also a forecast includes turnover whereas you are not interested in turnover at all at this stage. It is only about costs and expenses and nothing else.

All of the high street banks can supply cash flow forecasting material so use it. It is a simple format and there is no need for me to repeat it here. The only thing I would remind you is that you must do it in real detail and not in summary form which some systems encourage. Do not spread payments over twelve months in the forecast if you pay them four times per annum. Do not use one heading for light and heat if you have both gas and electricity costs. Use two. You need lots and lots of detail at this stage.

The next step is to decide which group of expenses to attack first. Should you choose direct costs (costs of sale) or indirect costs (overheads) to cut first? You are likely to have limited time and resources so you will want to achieve the greatest improvements in your profitability in the shortest time scales. Rather than using a scattergun approach and start slashing costs wherever and however you can, you should look for those costs that will have the greatest effect on profitability and work downwards from there to the smaller ones.

We have developed a whole bunch of tools and resources to help our clients cut their costs without being detrimental to the future success of their businesses.

Control your business and finances better

Mon, 26 Nov 2018 16:47:17 GMT

Why do some businesses appear to get so much more from their monthly management accounts than others?

Perhaps they have discovered that there is so much more to be gained if they can analyse their monthly accounts in such a way that they can exploit opportunities quicker and turn potential problems into competitive advantages.

Too many business people see accountants as a necessary evil. Someone they have to refer to once per year because the government insists that they keep accurate books and records so that the Inland Revenue can collect their tax.

In fact it seems sometimes that you are paying one person just to tell you how much to pay someone else. Where is the value in that?

Isn’t this a bit like paying an experienced sales person just to make the coffee or do the filing? Are you not wasting the huge amount of experience that your accountant has gained over the years? Seeing both success and failure, and understanding why the difference has occurred? Having both the qualifications and the practical experience to enable him to recognise both problems AND opportunities. This experience has to be priceless so are you using it?

Many small businesses prepare monthly accounts and gain a small benefit from doing so, but as they would prefer to spend their time “doing what they do best” and do not wish to study for an accountancy degree, they are not necessarily getting the valuable information available from their figures.

Imagine being able to receive fast, timely guidance on what you have just done enabling you to quickly decide what you need to do next. Not having to wait until after the year-end but each and every month receiving practical advice right away. Advice to enable you to make effective decisions and exploit your true business potential.

And what about dealing with problems faster too?

If you have to wait until the end of your accounting period to be advised of a problem, perhaps because it has suddenly become highly visible, it could be too late. It has probably become an “elephant task”. A problem so large that it can either be extremely expensive and difficult to rectify or it may even be terminal. If it can be rectified at this late stage it will not be fast, it will not be easy and it certainly will not be cheap.

If however you catch a problem when it is small, it is fast to rectify, it is easy to solve and it is inexpensive to put right. A simple change of direction. An easy change in your procedures. A small correction in the way you do business.

Most problems start small and then grow unnoticed over a period of time, so it is essential that if you already prepare monthly management accounts that you use them effectively.

Certainly you need to speed up the preparation of these accounts so that you get your information as soon after the month end as possible. Receiving figures towards the end of the following month has meant that if a problem has occurred yet another month has gone by before you can begin to rectify it.

Many business owners believe that they have to wait for every outstanding invoice before they can “close down” the month otherwise the figures will be incorrect. However this is in fact less important than speed when it comes to monthly accounts whereas annual accounts need accuracy with speed being of a secondary consideration.

I am sorry to have written so much about problems because exactly the same applies to opportunities.

Most business owners are working so hard in their businesses that they do not have time to stand back and look at where they are going. Time is a luxury and few of us ever find the time to work ON our business rather than just working IN it. Surely then the chance of identifying opportunities or positive trends earlier must be priceless? Why not create an early warning system, to direct you towards positive trends so that luck becomes yours to control. Someone once said that luck is opportunity meeting preparation. But if you fail to spot the opportunity soon enough then all the preparation in the world will have been in vain.

So if you can nip any problems in the bud and spot opportunities as soon as they appear, how much more successful would your business become?

So what do you need to do?

Use your accountant to monitor your monthly figures, to look for problems and opportunities so that you can concentrate on what you do best.

Ask him to provide you with easy to understand graphs and key performance indicators so that you can easily and quickly understand what is going on, which can save you huge amounts of your most valuable asset – your time.

Receive information in a non-accountancy way, using simple language and pictures rather than reams of hard to understand figures.

Demand advice and recommendations rather than options and warnings.

Financial vigilance is one of the hallmarks of a successful company and many business owners learnt this hard lesson during the last recession.

If your existing accountant does not provide this service then we at Wood & Disney can help you. Designed to make more of your monthly management accounts, we provide jargon free analysis and explanation, with the added ability to project forward to enable you to assess the impact of potential decisions.

Ask us if you have any other key frustrations such as:

* Profits are too low

* Competition is making life harder

* You have to work too hard

* You are not enjoying life as much these days

* Too much within your business relies upon you

* There are too many problems

* Cash flow is tight and customers are slow to pay

It is likely that we can help you.

Doesn’t it make sense to bring in a Doctor before someone else brings in an Undertaker?

Thu, 22 Mar 2018 16:42:45 GMT

Although there appears to be no shortage of great business books and even free business advice, small businesses are continuing to struggle with below average profits leading to cash flow difficulties. They are not bad businesses and they will not necessarily fail, but the sad truth is too many will. During economic prosperity they claw themselves from month to month just making enough profit to pay their way, but seldom being able to stash away surplus profit or reduce an overdraft which has become hard-core borrowing. It only needs one poor month to cause everything to come crashing around their ears.

Whatever industry you are in, there will almost certainly be competitors who are making fantastic profits and those who will fail. Most will be somewhere in the middle. But why aren’t you making as much money are your most successful competitor? Generally the reason given will be financial. “He is bigger and has economies of scale”. “He owns all of his own plant or vehicles so doesn’t have the cost”. “She owns her own show room so doesn’t have the high rent to pay that I do”. “He spends more on advertising then I do”. “He has been established longer than me and can afford to charge more”.

No matter what the industry, the reasons are always the same and are finished off with “but my business is different”. Every human body is different but the illnesses are generally the same. Some occur as a result of how you treat your body and others are down to having reached a certain age. Bodies and businesses are very similar.

If your business is not fit then seek the advice of a business doctor before it is beyond repair. But what does a business doctor do? It’s all about balance. If you concentrate on just one area of your business it cannot possibly run as smoothly as it could if all the critical areas were given the same amount of attention. So what are the critical areas?

Some business gurus say that there are only 3 key skills needed to run a small business:

The ability to sell the product or service.

The ability to produce or deliver the product or service.

The ability to collect the money and realise the profit.

Most people who start up a business can only do number 2 (or part of number 2). They have a technical skill learned while working for someone else and believe that this is all they need to know to run a successful business. At the very least they only know a third of what they need to know but in reality they probably know less than 10% of what it takes to run a successful business. We, in fact, have identified 13 major areas that need to be balanced and the only way for a small business owner to cope is to either learn incredibly quickly or to use the experience and knowledge of outsiders.

There is little space in this article to explain these areas in detail but probably the most important area is leadership. How would you lead a team to the North Pole without planning and what about a map to show you where to go and to help you identify the likely problems you will face on the way? Less than 3% of small businesses have a written plan of where they are going and how they are going to get there. They do not have defined targets, they do not know what their Key Performance Indicators (KPIs) are and they have little idea what their breakeven position is. There is an old saying which states that “what gets measures, improves”.

So you must plan, record, compare and therefore control what happens to your business rather than just drifting along and keep your fingers crossed that things will be ok. This is very much the role we have with some of our clients where we are actually journeying alongside them throughout the year rather than turning up after the year end to prepare a rather meaningless historical summary. By then it could be too late.