It’s that time of the year when (good) accountants start to make grumbling noises to their clients that it’s now the time to prepare their year end accounts. I received a letter from the firm that I use two weeks ago. It contained the usual nudge in the letter, a list of what they would like to have from me and an envelope in which to return everything.
I know that in some dental businesses correspondence like this produces a variety of reactions.
Firstly there’s the “file it there’s plenty of time” approach – this often comes when there’s a hidden fear that the accounts aren’t going to be as healthy as the preceding year or when the accounts are frankly in a mess. In these businesses the financial year end comes as a surprise every year. They are the places where I hear complaints that they haven’t got enough for tax bills and that their accountants are always too slow. Typically the approach to finances is to cross their fingers and hope that the month runs out before the money, they are constantly renegotiating their overdraft and have no idea what the real running costs are.
Then comes the “we have got everything ready haven’t we?…haven’t we?”. There follows a dawning realisation that the new software you invested in and that was going to save your skin this time hasn’t been loaded correctly. Perhaps the person to whom you thought you had delegated everything hadn’t been properly trained and didn’t realise that it was essential to take and keep a backup. Too late you find that they have been keeping statements and shredding invoices (for data protection you’re told).
Sometimes the owner will not let anyone do anything with the accounts because they are “protective” of the business finances. Often that goes along with the poor leadership and communication you find in what I call “corner shop” practices. So inevitably in a corner of a room in the principal’s home there is a box full of receipts, printouts of schedules, cheque stubs (not prepared to use digital banking yet)
The above situations may sound silly and far fetched yet I find cases like this on my travels, often in what at first appear to be the best of practices.
So how should it work? Firstly, find an accountant that you trust and that wants to get your books as soon as possible after the year end. Find out from them exactly what information they will want from you and when.
Next get into the habit of preparing monthly management accounts for yourself – learn how to do it then delegate it. Get into the habit of comparing month on month.
Computers were invented for spreadsheets, learn Excel. You will learn more about your business from an Excel spreadsheet than from anything else.
Prepare and use budgets – be prepared for what’s coming next. The best way to survive the future is to anticipate it. With the help of spreadsheets and budgets you can see where you’re going and where you have been. You can work out when it’s time to increase your fees, when to give a pay rise and what you’ll need to earn when you’re considering investment.
No information means no analysis, no predictions and no control of your business. You may feel sometimes like you have a tiger by the tail at least by grabbing hold of your finances you can see what animal it actually is.