CASE STUDY Improved cashflow management brings profitable growth and peace of mind
From Constant Cash Pressure to Profitable Growth and Peace of Mind
IT solutions company SkillWise UK had lots of technical experts within its team, but no expertise in the finance function. The owners realised that the lack of professional in-house accounting support, specifically around cashflow management was causing significant problems for the business – and for them personally. They had a great product, and a strong client base and market, but cash was constrained and they felt fed up and frustrated by their ROE (return on effort) and the imbalance of hard work vs reward.
Paul Greenhalgh from Skillwise UK Ltd talks about why he would recommend working with Your Right Hand Finance Team.>
As many business owners do at some stage in their business life, Paul Greenhalgh, managing director of SkillWise, and his fellow director Wayne Soutter had an inexperienced (and cheap) self-employed bookkeeper (a friend of a friend) looking after the bookkeeping for them. A local firm of high street accountants was responsible for the annual accounts and tax returns, filing VAT returns, running the small payroll and preparing quarterly management accounts. It cost around £12,000 a year.
But Paul and Wayne found they were getting more and more involved in invoicing, payments and correcting errors made by the bookkeeper – there seemed to be loads of spreadsheets. And the management accounts lacked any kind of clarity. Sales and profit fluctuated wildly every month, even though SkillWise invoiced monthly subscriptions, and the accounting costs were increasing, even as the cashflow got harder to manage. The directors were confused and frustrated, and neither the bookkeeper nor the accountants had any answers.
Finally, Paul and Wayne had had enough of the lack of money management! They were having a moan over a beer with a business acquaintance, when he suggested they talk to Your Right Hand Finance Team.
- Lack of operational expertise in the finance function, leading to poor financial control.
- No proper credit control practice and customers paying late.
- No visibility of costs, profit or cashflow to help decision-making.
- Directors distracted from core duties, and feeling “stuck” and frustrated.
- Volatile cashflow compounded by shock tax bills.
- Rising accountancy bills.
Paul and Wayne wanted their accounting support to be efficient, cost-effective, and sustainable, rather than a short-term fix. They didn’t have time to recruit someone (and also nervous about making the same mistakes again), and they didn’t want to have to run “accounting” as well as everything else.
We initially assessed their existing bookkeeper, providing key training, while also reviewing the accounting processes, but she just couldn’t “step up”. We know that all businesses need someone doing the day-to-day and a more experienced financial controller. Wayne and Paul quickly realised they would benefit more from us implementing best accounting practice and the access to our unique, managed team service.
Over the first month, a YRH Financial Controller put better, simpler bookkeeping processes in place (YRH best practice) and worked with a YRH Finance Manager to get customer payments collected and the bookkeeping up to date and under control. Wayne and Paul were massively relieved, and even more, delighted when they realised we’d paid for ourselves.
Quickly identified £90,000 of missed recurring billing
Debtor days reduced from 87 to 32 within 3 months
YRH worked in two phases to…
- Focused on getting the billing up to date, we helped SkillWise communicate recent price rises to clients, issued invoices for missed billing and put in a control so that recurring billing was prepared automatically.
- We concentrated on collecting all the customer money owed, implementing YRH credit control best practice, which includes debt monitoring and weekly status updates.
- We introduced deadlines for suppliers sending invoices every month, implemented regular payment runs, and got the directors’ expenses up to date (they were shocked at what they were owed).
- We replaced the many duplicated and complicated spreadsheets that were being used with a simple set of insightful management reports and graphs.
- Phase 2 was all about preparing the business for growth.
- We worked closely with Paul and Wayne to develop an annual budget and action plan.
- We analysed the revenue being generated by the sales people, and the cost of customer acquisition in marketing which helped them make informed decisions about both.
- Analysis of the existing revenue by product type, industry type and business channel helped them refine their new business strategy.
- We reviewed sales pipeline, client profitability, and implemented project costing for quotes.
- We helped them develop a costed technical roadmap to manage technical development costs after the management information showed they were over-investing.
“YRH provides the flexibility for you to take exactly as much highly professional finance service as you need, and that support can grow or contract just as you need it.”
Paul and Wayne freely admit that they hadn’t appreciated how poorly they were being supported until we started work with them. Their relief was apparent “from the moment we first engaged YRH.”
Paul explains: “All of the things that we know we’re not good at were taken away from us and efficiently brought under control by someone who’s an expert at doing just that. The YRH team supporting us quickly felt like members of our own team and they really understood our business – they really understand how our company works and what’s best for us, and for our customers too.”
“Finally, we could focus on development and sales – YRH are brilliant at keeping us informed about the money without us actually having to do anything. But they didn’t let us get away with just dumping responsibility on them, either – they really helped us engage with our numbers and use them to build a better business”.
- First set of management reports & a robust cashflow forecast received within first month
- £90,000 of missing billing identified & invoiced.
- Debtor days reduced from 87 to 32 days within 3 months.
- £120,000 cash improvement in 2 months, the overdraft removed & a healthy bank balance ever since.
- Profit increased consequentially & directors had appropriate information for proper planning.
- £36,000 refund of corporation tax from R&D tax credit missed claims.
- No more unexpected immediate payment of tax bills
- Visibility of profitability on project work & technical spend.
- More consistent margins & complete visibility of breakeven point.
- The directors felt their work/life balance became greatly improved.
Delighted with the support he gets from YRH, Paul continues to work with us to this day (it’s been 10 years now), and is an amazing advocate for YRH
“Not having to worry about the finances any more is an enormous weight off my mind,” he says. “The knowledge that everything is simply under control gives me great comfort. And there are plenty of practical benefits too – working with YRH enables the business to function so much more efficiently.
“We now have a professional finance function, with processes in place and a depth of management information that we quite simply have never had before. Having cash coming into the business on time allows us to grow and build our market.
“The service that YRH offers is so unique, and yet so powerful for SME business owners – being able to access business best practice and talented expertise on a flexible basis makes such good business sense. They have paid for themselves many times over.”
“YRH’s focus on improving cashflow and profit has been the biggest benefit of working with them. It’s made a massive difference for us!”