Accounting & Tax Case Studies
Case study 1
A rapidly expanding firm of architects, who had grown their business to a certain size without any financial expertise, were aware that to make the most of the expanding market and their own profitably, some form of financial expertise was necessary.
To improve the efficiency of the organisation and ensure they were maximising their profitability through client billings, it was necessary for In the Black to install a proper job costing system. This would guarantee that all chargeable hours were billed, any additional requests from clients were clearly identifiable and any expenses and disbursements could be easily recharged.
As is typical with many small firms, the architects’ firm was only using a small part of the accounting system they had in place. This system needed to be updated, rationalised and properly utilised to obtain good management information to assist with the efficient running of the business.
In addition, the firm did not have regular monthly management accounts, so they didn’t know exactly how the business was performing on a day-to-day basis.
In the Black quickly established a system of regular management accounting; this has been further refined in order to provide the necessary information to shape the business in a clear and easily digestible way. The reporting provided within the business now measures the performance against the same month from the previous year as well as to budget, ensuring that they are on track to continually improve performance.
Cashflow becomes an issue in many businesses and it has been necessary to evaluate various methods for improving cashflow and working capital.
As the ‘credit crunch’ has taken hold, it has been necessary to have all of these measures in place to maintain the profitability by adjusting the business model and understanding the changes that need to take place. The reporting has also played a part in maintaining the support of bankers and other external organisations.
Case study 2
In June 2007, In the Black began working with a firm of landscape gardeners. From the beginning, it was clear that they had a good business concept but were generating losses and had been for some time.
The first step for In the Black’s accountants was to fully understand the business, their clients and what set them apart from their competitors. They were clearly good at what they did, landscaping gardening and had satisfied clients with sizable budgets to spend on achieving the perfect contemporary garden. They had good staff who were qualified and highly skilled. Yet, as landscape gardeners had been generating losses for some time, this impacted on their cash flow and they had fallen behind with a number of payments to their suppliers and HMRC.
In the Black’s accountants established a business plan for the revised business model to include full budget financials, profit and loss, balance sheet and cash flow forecast for three years.
From this, we were able to set out a realistic payment plan to repay all of the outstanding creditors over a 12 month period while operating a profitable business.
From analysing the business’s pricing structure, it was clear that they were not charging enough for the services they provided. The company was working in the high end market, yet charging average prices. This had to change. They began quoting and winning work at rates three times higher than they were originally charging.
While sorting the pricing structure, it was also necessary to analyse the company’s overheads and strip out any unnecessary costs to make the business leaner and operate the services that gave the greatest return.
To ensure they were on target throughout the year, In the Black measured performance against budget and continually updated the budget to reflect any changes that have taken place.
The result has without question been an amazing success, turning a struggling business into a profitable thriving business with a stable platform to achieve further growth in the future.