[Case Study] We were turning over £1m, but had no cash

31st July 2019

“It was lots of small tweaks that made a big impact on our cash flow.”

That’s what Trevor Hammond told me when I caught up with him recently.

Back in 2017, the building company he owns with his son Matt, Byford & Hammond Ltd, had two people in accounts…

….neither of them experienced with managing the finances of such a fast-growing company.

It was starting to show – especially when it came to Trevor’s stress levels.

You see, on the one hand, Trevor owned a successful company that had expanded quickly.

Customers were coming in, jobs were booked and they seemed to be turning over a significant amount of money. Trevor and Matt had a lot to be proud of.

But when Trevor looked at his financial processes and cash flow, they told a very different story.

Expenses outstripped earnings, leaving Trevor constantly anxious.

“If we’re turning over £1 million a year, why don’t we have cash to show for it?” he wanted to know.

Without cash, Trevor couldn’t invest in new equipment, premises or people – the very things he needed to scale his company even further.

He was also painfully aware of how much detail he didn’t have on the company finances. The balance sheet didn’t seem to make sense and reporting didn’t exist.

He had noticed that the accounts team were using different spreadsheets to log different parts of the same job. It was impossible to follow one job all the way through the system.

Chaos reigned!

That’s when he got in touch with me.

Although we primarily help companies who want to outsource their finance department, Trevor knew that we also had a service to help companies who want to keep their finances in-house.

We agreed that I would spend a day combing through every detail of the company’s financial management - from how they log purchases, to invoicing, payments and who did what in accounts. I would also spend time with his accounts team, to understand how they operated.

That way, I could identify any gaps, critical errors and also opportunities – and make recommendations for change, so that his accounting department could operate much more smoothly and the company could finally turn a profit.

There is no question that Trevor was nervous about this process. He felt the burden of responsibility for what happened in his company, and was worried about what we might uncover.

But as a responsible – and brave – business owner, he was ready to do what was right, even if it felt uncomfortable.

Shortly after our (very pleasant!) day together, I sent Trevor a detailed report on exactly what changes his in-house team needed to make, to sort out his financial systems and free up cash.

They then got to work implementing the recommendations.

For example, instead of using a name to log a job (which is difficult to track), they started using a number.

The team set up a simple spreadsheet to log the materials they purchased. This simple change helped reduce costs, because they could finally see what exactly was happening!

And moving forward, they made customers pay twice a month rather than monthly, keeping cash flowing in regularly.

There were also some personnel changes required, to achieve the necessary objectives.

Individually, these were mostly small changes. But over time, they added up into a big difference.

The accounting team worked more efficiently, the company began to grow financially and most importantly – Trevor finally had the working capital he needed to function smoothly and to scale. His stress levels dropped, too!

I see many companies reach the stage Trevor was at two years ago.

Growing quickly, building up a customer base, but your financial processes just aren’t fit-for-purpose.

So when you look at your numbers or your cash flow, a feeling of dread washes over you. There are always problems with your accounting department, the money doesn’t seem to add up - and you just can’t understand why.

You imagine that you need a total overhaul of your financial processes and fancy new systems to fix things.

But often, just like with Trevor, some small tweaks to your existing system are enough to have a  big impact.

Are you wondering whether this is the case for your company, too? The two-day process we took Trevor through was our Business and Financial Management Audit. It is designed to help if you want to keep your finance function in-house, rather than outsource it, but need help identifying exactly what is going wrong and how to fix it.

As we run the finance function for scores of other companies, just like yours, we can see exactly what you need to do really quickly! Bring an expert eye to your in-house accounting department.

Get in touch today to find out more.

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