Management Accounts Case Study 2
About 30% of our clients have been referred to us with the following scenario:
A family business passed on generation to generation. Historically cash rich, low debt, historically highly profitable and current director knowing only their business with no experience elsewhere. No management accountant as ‘not been a need for one’ and happy to get their financial results on an annual basis which is a ‘nervous time’ to discover their tax liability both personal & business. Over recent years cash is getting tighter and tighter and directors need to act, although not sure what to do as they have never been in this position before. Most staff have been with the company for years, and although very loyal not the most up to date and very adverse to change. Director contacts statutory accountant who refers us in for assistance.
- Short term cashflow forecast to ascertain cashflow position
- Reconcile cash to profit to ascertain why the cash has declined
- Prepare financial data to analysis current situation compared to historical situation i.e. profit per product, customer spend, overhead analysis etc
- Report analysis back to director who can then act accordingly
- Continue to report monthly to show the effect of the directors actions
- Assess current accounting staff and retrain where necessary
- Carry out an overhead review to look for savings
- Refinance if needed with appropriate lender
- In extreme circumstances assist the director in downsizing to cut out non-profitable turnover which takes up valuable resources — i.e. ‘cleanse’ the business.