Trouble Brewing?

Rob Leake of NumberMill walks through the pitfalls and warning signs that you’ve outgrown one of your professional support structures – The Accountant.

With the tumultuous last few years, we have seen an increase in the number of recruitment businesses reaching out to us for reparatory accounting. Often, they’ve been using the same general-practice accountant since their founding and have now discovered that their business has quietly outpaced the incumbents ability to support them.

By this point their balance sheets are in chaos, cash-flow is in a critical condition and profits have been over/under stated. In the worst instance, this was only discovered when they tried to sell resulting in the CEO’s retirement plans being unexpectedly deferred.

The pace of recruitment far outstrips that of many other sectors and the regulatory framework is more nuanced and complex than high street accountants are often prepared for. When you founded your business, the accountant was simply there to gather your receipts and submit your year-end returns but now they should be an integral part of your organisation and planning processes.

You understand how to recruit and how to board clients, but as a business owner it’s important you have at least a basic understanding of the various accounting processes and what to watch out for. To help you avoid this in your own business, here are some examples of what your accountant should be doing and where things can go wrong so you can spot them and draft in specialist accountants before the crisis point.

Bookkeeping: This involves maintaining a business’s financial records, including invoicing, tracking expenses, and reconciling bank statements.

Disorganised records: Your bookkeeper is not keeping your records, including wages, control accounts, debtor management and tax control accounts, organised and up-to-date. They easily get out of control and unwieldy especially if an experienced bookkeeper or accountant does not understand their importance in a temp based business. If provided by a separate service to your accountant, communication between the two is poor.

Unexplained discrepancies: If there are discrepancies in your accounts that are not explained, it could indicate an error in bookkeeping feeding through to your accountant.

Missing or duplicate transactions: If you notice missing or duplicate transactions in your books, it’s a sign that your bookkeeping service is not being performed accurately.

Taxation: This involves preparing and filing tax returns, advising on tax planning, and dealing with tax enquiries and disputes.

Late or missing tax returns: If your tax returns are filed late or not filed at all.

Tax planning: A good accountant will proactively guide you through optimal tax planning. A holistic view is required as taxes often interact. Salary or dividend, corporation tax and income tax decisions, capital gains and inheritance tax. Long term plans, both from a business point of view and a personal view, need to be taken together.

Lack of communication: If your accountant doesn’t communicate with you regularly or doesn’t respond to your inquiries quickly.

Financial reporting: This involves preparing financial statements, such as balance sheets, profit & loss, and cash flow statements, to provide a snapshot of a business’s financial health.

Inaccurate financial statements: Your financial statements not accurately reflecting the financial position of your company.

Lack of transparency: A lack of clear and transparent financial reports.

Missing or incorrect entries: Errors in your financial statements.

Payroll: This involves managing a company’s employee payroll, including calculating and processing salaries, tax, and other deductions.

Incorrect pay: Employees are being paid incorrectly or pensions not being processed accurately.

Inefficient payroll processing: Your employees not being paid on time. Lack of flexibility in payroll timings when emergency issues come up.

Unresolved payroll issues: Incorrect tax or National Insurance contributions, delays in setting up new starters or slow responses to leavers.

Management accounting: This involves providing management with the crucial information they need to make informed business decisions, such as budgeting, cost analysis, and performance evaluation on a regular basis i.e. monthly or quarterly.

Inadequate analysis and insights: Management accounts should provide quality analysis and insights into your company’s financial performance.

Failure to provide timely reports: If your accounting service does not provide timely management accounting reports, it could affect your decision-making processes.

Lack of customisation: Being unable customise your management accounting reports to meet your business needs, one size does not fit all.

Financing: This involves advising on financial matters related to business transactions, such as acquisitions, disposals and raising finance.

Inaccurate financial projections: If your accounting service provides inaccurate financial projections, your ability to informed financing decisions will be hindered.

Lack of financial strategy: A specialist accountant should be able to provide a clear financial strategy for your business.

Inadequate cash flow management: Inadequate cash flow management can result in cash flow problems impacting your business operations and impinging growth.

Having accessible accountants in your corner who understand how your sector works and can get straight to work streamlining your financial processes and maximising shareholder value has been a game changer for recruitment businesses we work with.

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