Business Consultancy – Logical BI

Do I Need a Finance Director? A Guide to Making Informed Business Decisions

James Healey — Thu, 30 Nov 2023 10:51:37 +0000

Introduction

When it comes to running a business, managing finances can be a complex and time-consuming task. From ensuring compliance with regulations with HMRC and Companies House, to maximising tax benefits, handling finances effectively is crucial for long-term success. One question that often arises is whether hiring an accountant is necessary. In this post, we will explore the various reasons why having an accountant can prove invaluable for businesses of all sizes.

Ensuring Compliance and Financial Reporting

Staying compliant with financial regulations is vital for any business. Failure to meet statutory requirements can result in penalties, legal issues, and reputational damage. Accountants are well-versed in financial laws and regulations, ensuring that your business remains compliant. They can assist in preparing and submitting accurate financial reports, tax returns, and other necessary documentation, saving you time, headaches and mitigating the risk of errors and restoring sleepless nights!

Maximising Tax Allowances and Reducing Tax Liability

Navigating the complexity of tax regulations can be a daunting task. Accountants possess expert knowledge of tax rules and can help you identify and maximise available tax allowances and deductions. By utilising their expertise, gained from many years of experience and qualifications, you can potentially reduce your tax liability, freeing up resources that can be reinvested into your business’s growth.

General Support and Guidance on Business Decisions

Running a business involves making many numerous financial decisions, ranging from pricing strategies to investment opportunities and some of these decisions are required very quickly. Accountants can provide valuable insights and guidance based on their understanding of your financial situation. By analysing financial data, they can assist you in making informed decisions that align with your business goals and maximise profitability and cash whilst potentially reducing your workload – an extra win!

Providing Clarity on Finances

Understanding your business’s financial health is crucial for making strategic decisions. Accountants can help you gain clarity on your financial reports, cash flow statements and implement performance indicators. By interpreting and explaining these financial reports, accountants provide you with a comprehensive view of your business’s financial performance. This knowledge enables you to identify areas of strength, address weaknesses, and make adjustments as needed.

Helping You Understand Finance

Not everyone possesses an in-depth understanding of finance and accounting principles, an nor should we all need to, we all have our own areas of skill and expertise. Accountants can bridge this knowledge gap by explaining financial concepts and terms in a way that is easy to comprehend. This enables you to make informed decisions based on a solid understanding of financial data. Moreover, accountants can educate you on budgeting, forecasting, and other financial management techniques, equipping you with the tools to better control and grow your business.

Conclusion

While it is possible to manage your business’s finances independently, the benefits of hiring an accountant are undeniable. From ensuring compliance and submitting accurate financial reports to maximising tax benefits, and providing general financial guidance, accountants play a crucial role in the success of any business. By entrusting your financial matters to a qualified professional, you can focus on other aspects of your business with peace of mind, knowing that your finances are in capable hands. In today’s competitive business landscape, having an accountant is not just a luxury but a necessity for sustainable growth and prosperity.

To find out about our range of tailored range of accounting packages click here, we have packages to suit all budgets and requirements, covering local and national businesses. Always ensure that your accountant is qualified, regulated and insured to support your business, as we are at Logical BI Limited.

Impactful reporting: A management reporting framework for success

Pauline Healey — Sun, 30 Oct 2022 21:41:37 +0000

Many business owners are familiar with the need for a profit and loss account and balance sheet reporting. However, fewer may understand the value of creating a management reporting framework that encompasses wider key performance indicators. Management reporting is vital for monitoring the health of the business, understanding variances to plan and making key strategic decisions. Without accurate and timely management reporting, a business owner is operating on assumptions and guesswork, leading to poor conclusions and potentially expense mistakes.

Creating an effective management reporting framework

The value of effective management reporting is often diminished by inaccurate information. It can be difficult to provide timely information if it is held in disparate source systems that require significant effort to collate. Reporting must address the real information needs of management to be impactful.

Beyond the profit and loss account and balance sheet, there is a wealth of invaluable information for business owners and managers. An effective management reporting framework could include KPI reporting, cash flow, sales and inventory reporting to name a few.

The aim of management reporting is to:

Regularly monitor specific performance metrics and KPIs
Understand the status and progress of a business objective
Determine next steps on the journey to achieving goals
Ensure better communication between stakeholders, colleagues, and managers

Different types of management reporting

Whilst many reports have a financial angle, some of them might include multifunctional KPIs from a range of business areas such as marketing, customer experience, logistics, quality control, output and so on.

Financial reports could include cash flow for at least the next three months, P&L, balance sheet.
Sales/customer reports – these must be sufficiently detailed to show which service or product lines, geographies and other relevant demographics are driving sales and where more effort is required to reach targets. Reports should identify gaps in the pipeline, conversion rates, bestsellers, most effective sales teams, pricing strategies and so on.
Inventory reports – businesses need to know how much money is tied up in raw materials, work-in-progress and finished goods to ensure efficient use of company resources. This reporting could also identify issues with stock availability, sourcing concerns, warehousing costs and risks in the end-to-end supply chain.
Project reports – project reporting might include charts tracking activity level progress against the project plan, resourcing options, constraints and project costs against budget.
HR and personnel reports – this could include headcount tracking against resourcing plans, absence management, staff recruitment and retention and productivity.
Compliance reports – this could include regulatory and manufacturing compliance, health & safety and HR.
Variance analysis – detailed variance analysis reports enable you to identify which service or product lines are profitable, where defects or errors occur and where productivity can be improved. Reporting of actuals against budgets and forecasts can highlight potential risks as well as opportunities.
Forecast reports – financial forecasts are necessary to identify potential issues. All areas of the business should be involved in the forecasting process.
Board reports and executive summaries – highlighting key company objectives, tracking against the planned timeline and focusing on the most important success measures. This could be achieve using 3 to 5 key traffic light measures
Process/systems reporting – a detailed review of your business processes and systems can identify inefficiencies and highlight opportunities to eliminate waste using automation and continuous improvement.
Internal audit reports – internal checks enable businesses to identify and fix problems early before they become larger issues.

A clearly defined management reporting framework can enhance your decision making, improve company performance and maximise profitability. Using a suite of tailored reporting, specifically designed for your company gives you all the information you need to make the right decisions at the right time.

Logical BI offers a bespoke set of management reporting for small and medium sized companies and has many years’ experience working with coaches, trainers, agencies, distributors, manufacturers, engineers and solicitors.

Your business, whether product or service, can benefit from a deeper understanding of your activities, to help you mitigate risks, spot opportunities early and deliver on your targets. Logical BI can provide outsourced management reporting support or can work with your finance teams in a consultative capacity to help you create the optimal management reporting framework for your company. Call 01772 287400 or email hello@logicalbi.com to find out how we can help your business achieve more.

Why not connect with Logical BI on LinkedIn

Strategic Financial Management for your Manufacturing Business

Pauline Healey — Thu, 13 Oct 2022 07:56:50 +0000

Running a manufacturing business is complex and keeping control of the finances is no exception. Although most manufacturing business owners understand the need for compliance and financial accounting, the benefits of strategic financial management may be less obvious.

Manufacturing is a cash-intensive business and cash could be tied up in working capital for weeks or months making it vital to have accurate record keeping and in-depth analysis to enable managers to make informed business decisions. It’s not always possible to turn around a decision quickly, so careful planning enables you to avoid costly errors.

Let’s look at some of the business areas where you can run into trouble if you don’t have a good handle on your numbers:

End-to-end supply chain requirements

End-to-end involves the entire supply chain process, from product design and procurement of raw materials, manufacturing and delivery of the final product as well as post sales customer service. End-to-end supply chain best practice involves building collaborative relationships with your suppliers where you are all working towards the same goals. You may be importing and exporting goods, so that can come with additional legal and financial complications which means it’s vital to understand, record and accurately track your figures.

Tooling and NRE costs

NRE (or Non-Recurring Engineering) and tooling are unavoidable costs of manufacturing new products or enhancements to existing products. NRE, which includes tooling is the one-time cost to research, design, develop and test a new product. The NRE cost needs to be included when looking at the overall profitability of a product as these costs can be prohibitively high. Without a clear understanding of your non-recurring engineering costs, you could make a costly decision to continue production of a product that is loss-making. It’s not uncommon for new manufacturing businesses to underestimate the NRE costs for bringing their product to market.

Compliance and quality control

Manufacturing compliance includes the technical, legal, and corporate requirements, regulations and practices manufacturers must satisfy as they produce and market products. When businesses are struggling to remain compliant with key legislation such as GMP within the food, cosmetics and pharmaceutical industries or ISO standardisation regulations in other industries such as engineering or IT technology, they run the risk of expensive fines as well as missed sales opportunities. Remaining compliant with standards for manufacturing and quality enables you to compete in international markets, growing your business globally rather than just domestically.

Raw materials, work in progress and finished goods

One of the biggest costs for manufacturing companies is the materials cost to make products. Thousands of pounds can be tied up in inventory, whether in raw materials, work-in-progress or finished products. Keeping a close eye on inventory levels enables you to keep your working capital as low as possible. Choosing the right inventory valuation method is important as it has a direct impact on the business’ reported profitability. Whether you opt for LIFO, FIFO or WAC, you’ll need to be consistent so that costs can be compared across accounting periods. An outsourced Finance Director can help you to assess which method is most appropriate for your company.

Cost of goods sold and direct/ indirect costs

Cost of goods sold includes direct raw materials as well as direct labour that can be attributed to each product. Having a clear understanding of project accounting can help your finance team to implement cost allocations that improve your ability to calculate which products are most profitable. In times of escalating costs, this can be vital for making quick decisions about whether to drop a product line or increase output.

Production line: Batch production, continuous manufacturing, test runs, shifts and down time

Manufacturing accounting focuses on the fine detail of what’s really happening on the production line. It looks at how to reduce wastage, how to cut your defect rate, how to manage staff shifts, whether to run batch or continuous production and many other aspects of running a factory. Strategic financial management that isn’t afraid to get down into the minutiae of how things really work is a huge asset to your business.

Continuous improvement and customer care.

Creating a thriving business is not just about having a good quality product. These days consumers are savvy and the internet makes it simple to shop around, not only for the best price, but also the best customer experience. A programme of continuous improvement and a culture of customer care will put your company top of mind when customers are looking for your product – price may not be the right differentiator, particularly in times of high inflation.

Reporting beyond just sales, P&L and Balance Sheet.

There is so much to understand to ensure your financial strategy, plans and reports are accurate> That’s why you need a finance partner with over 20 years of manufacturing experience who understands your issues on the shop floor and within the supply chain. Performance metrics, cash flow forecasts, funding options and working capital management are all vitally important and may not fall under the remit of your Financial Controller.

The benefits of strategic financial management for manufacturing businesses

An outsourced Finance Director with a background in manufacturing accounting can provide a whole new insight into the financial health of your business by providing reporting such as detailed variance analysis, cashflow forecasting and tracking, working capital management reporting and appropriate funding options. In addition, strategic financial management can help identify any specific tax breaks, incentives and grants available for your manufacturing business.

Many manufacturing businesses are also at the mercy of the global supply chain and can be impacted by the fast-changing global economy. When you are importing and exporting, a previously successful business can rapidly become a loss-making organisation if insufficient attention is paid to what’s happening with exchange, inflation and interest rates around the world. Using an outsourced Finance Director with many years’ experience, both in the UK and overseas manufacturing environment, allows you to anticipate and mitigate issues quickly.

Your business, whatever its size, can benefit from closer analysis of what’s happening operationally, so you can improve your strategic decision making and plan well for the future. Logical BI can provide strategic financial management support at FD level or can work alongside your finance teams in a consultative capacity to help you achieve your long-term goals. Call 01772 287400 or email hello@logicalbi.com to find out how we can help your business achieve more.

Why not connect with Logical BI on LinkedIn

You may also be interested in:
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How much should I charge for my services?

Pauline Healey — Thu, 30 Sep 2021 10:51:22 +0000

Or, “What prices should I charge for my goods or services?”

This is a simple question, and one that the majority of business owners will ask, and the answer changing over time.

Pricing is the money charged to a customer in exchange of goods or services. The price you charge for your goods or services is one of the most important decisions you will make for your business.

The price of your service is very important as it determines what income your business will generate and also how your customers will perceive your service. Many may ask “how much does it cost”, but price and cost are two different things.

The price is what your customer will pay, the cost is what your business will pay to create the service or purchase the goods from the factory or distribution channel.

Your customers view, or perception of your price differs based on the type of good or service they purchase and the amount of value or need they attach to the purchase; what is that purchase worth to your customer?

Price should never be considered in isolation, because you also need to know your cost and the value created for your customer;

The PRICE is your payment, your financial reward for the exchange of your goods or services
The COST is the amount you spend on producing you’re your goods or services
The VALUE is your customer’s perception of what they believe the goods or services are to them

How should I calculate my price?

There are two basic methods of pricing your goods or services; cost plus and value based, as you enter the market you may be unsure which method to use.

Cost plus pricing is simply the COST of creating or purchasing your goods or services PLUS the amount of money you need to cover your fixed overheads and your own income. Calculating the PLUS amount correctly is important.

You need to forecast ALL your costs of your business plus your own income desires (drawings, salary and/or dividends) and divide my your realistic minimum number of ‘unit’ sales over the same period of the cost calculation.

If you need help with forecasting your business costs and/or minimum price point business planning packages are available (link).

Value based pricing is focused on the price you believe customers are willing to purchase your goods or services, based on the benefits you provide to your customers.

As with cost plus pricing, you need to forecast your costs and realistic minimum number of sales as your LOWEST price to ensure that your business is profitable, if you price above your minimum. What you charge above that price will be determined on your customers perception of what they are purchasing.

If you are undercutting most of your competitors prices will you be perceived as lower quality? Will higher prices provide the perception of greater quality or premium value?

Should I increase my prices to create more profit?

Simply increasing prices may not increase overall profits, if prices rise but your potential customers perception of the price is greater than the value you add, sales will decline as less purchases are made. However, if your prices are too low are you throwing away potential profit?

Profit is sales less all costs. It is overly simplistic to think that increasing prices increases profits. It would be true if there were no general business overheads, but if the volume or ‘units’ of sales decrease, the overheads will be greater per sale. These fixed overheads may include insurance, office rental, and administration which are not directly linked to each individual sale.

Fixed overhead costs are absorbed across the total sales of the business, for example if fixed costs were £1,000 per month and sales were 100 ‘units’ per month, for each sale £10 of costs need to be absorbed. If a price rise reduced the sale to 50 ‘units’ per month, for each sale £20 of costs need to be absorbed. Has your price increase more than captured this increase in fixed overheads per unit sale?

Scenario modelling can provide estimations against various prices, costs, volumes and relating profits. All our business forecast planning packages https://logicalbi.com/business-planning-packages/ provide scenario modelling to enable you to compare alternative costs or revenue side by side.

By communicating the benefits you or your goods provide to your customer, by marketing and/or strengthening customer relationships you could retain your higher value customers whilst some others drop off but the overall price increase provides for a greater profit return for less customers, which means less work.

More profit but less work is the BEST WIN for all!

What is a Portfolio Finance Director?

Pauline Healey — Mon, 03 May 2021 16:40:03 +0000

A Portfolio Finance Director (‘FD’) can be an integral part of a business. The Portfolio FD operates the same as a Finance Director but on a part-time basis. They create and control the budget to ensure that all financial targets and regulations are adhered to; whilst offering financial guidance and advice. Their main task is to oversee all of the financial activity, including budgeting, distribution of funds to implementing policies.

As a business owner, you have several responsibilities. As your business grows, the demands increase and you may have to contemplate outsourcing business tasks. You may not yet be at the scale where you need, want or can afford a full-time Finance Director yet need the strategic financial support, if this is you a Portfolio Finance Director may be the answer.

The differences between a Finance Director and a Portfolio Finance Director.

The difference between a Finance Director and a Portfolio Finance Director is that as a portfolio FD, I can support multiple clients virtually or in-person throughout the North West. Whereas a Finance Director may work for one specific company on a full-time basis. At any given time, I can be working for several businesses but as they only need me for certain hours, it enables me to work with more than one company.

There are several benefits of using a Portfolio Finance Director. Several businesses are starting to use an portfolio FD or sometimes referred to as a Outsourced Finance Director or Outsourced CFO or for many reasons.

What are the benefits of using a Portfolio FD?

Money-saving; Many businesses do not have the funds to employ a full-time FD, therefore, using a portfolio one is enabling them to utilise all the knowledge and skills of an FD but not having to pay the full-time price for one.

Varied knowledge; As a portfolio FD is not solely working with one client, they will have different knowledge, across numerous industries and several new ideas that they may have picked up whilst supporting other businesses.

On demand; As a business, you can have the benefits of an FD but as and when you require one.

Different perspective; As the portfolio FD doesn’t directly work for your company, they can assess your business as an outsider.

Time-saving; If you are trying to take on the finance role yourself, think about the time that will be saved if you use an on-demand portfolio FD. Obtaining financial support will enable you to focus on the other important aspects of your business, core to your skills and passion.

Skills; A portfolio Director will have the same strengths and skills as an FD. For example, critical thinking, organisational and time management. They will also be keeping up to date with all the new policies and legislations that come in.

Businesses can see the multiple benefits of using one and Portfolio Finance Directors, or Outsourced CFO’s are in demand now more than ever. Read Pauline’s experience and some case studies to understand some of the roles that a Portfolio FD may support a business.

How much does a Portfolio Finance Director cost?

With the services of Pauline Healey at Logical BI, you have the option of paying for a monthly retainer from as little as two half days a month or for specific ad-hoc business finance, operations, or supply chain project. These prices vary by location, expertise, and if you are hiring directly with an individual Portfolio FD or via a business/agency with a pool of Portfolio FD’s available.

See our details for retainers starting at £395 per month or one-off business planning projects starting at £595. Do you want to find out how a Portfolio FD can support your business at a fraction of the cost of hiring a full-time position? See Pauline’s qualifications and book your free no-obligation discovery call today.

Also providing Business Booster Power Hours and Xero Annual Accountancy packages for Limited Companies and Community Interest Companies.

Integrity

chris.healey — Mon, 08 Feb 2021 13:10:00 +0000

What Is Integrity?

When it comes to your business, there is so much to think about when contemplating to outsource. You need to ensure that the person or company that you are outsourcing to has similar values and qualities that you and your business have. If you have different values, it could potentially be detrimental on your business. When I outsource any personal or business-related tasks, I need to ensure that they are outsourced to people that I can rely on and trust. Likewise, when I do work for others, I need to ensure that they have similar values to me and my business.

Integrity is a sought-after quality and is vital in general day to day life as well as in business and is one that I strongly believe in. A person that has integrity is someone who has the quality of being honest and who has strong moral principles.

Need For Trust and Honesty.

When it comes to running our own business, we need to know that we can trust who we are outsourcing to. My business is important to me and something that I have put a lot of time and effort into, I am sure this is the case for most businesses. As a Chief Financial Officer, I am delving into the finances of other businesses. Not everyone feels comfortable sharing this type of information as it is very personal. Don’t forget that financial professionals must have the quality of integrity. We have to demonstrate that we are trustworthy, honest and that we take pride in our work. We understand how delicate and sensitive the finances of a business is.

As a business owner, it can be difficult to ask others for support. You have dedicated hours to your business and maybe didn’t expect to ask for help. You may even start to question things and wonder what has gone wrong or why can’t you understand your business financial reports or why are you losing money? You may feel confused as to why your team output is poor, even though you are all working very hard. Remember that you are not a failure and are far from this. Your focus has been delivering your product, building strong relationships, helping others, seeking new opportunities. I understand that asking for help can be extremely difficult, sometimes we have to accept that we need to ask for support and outsource tasks.

As a CFO, I need to know that I can trust my clients as this is just as important. Trust with a client is gained on the first phone call and without it, I cannot do my job. I listen, I ask, I don’t judge and I don’t confide in others.

Integrity is needed from both parties as it will ensure that we will achieve the best results for you and your business, which after all is what we both want.

When thinking about outsourcing, think carefully about what values you have and question why those values are so important to you and your business

Is integrity important to you and your business?

Check out our range of business support services https://logicalbi.com/