Beware the Jabberwock or “the friendly chat”

Management Accounts

So we are at the end of week one and depending on the size of your business the management accounts should be just about ready. They don’t need to be perfect, they do need to be more or less, so that you can see trends from last month, get any discrepancies looked at while the issues are still fresh in peoples minds and you can catch any errors in peoples thinking. The management pack ought to contain Profit and loss account, Balance sheet, Top 10 customers, aged debt summary, aged creditor summary and a ……..

Cash flow

There must must must be a cash forecast for the next 12 months in the pack. This does two things. It shows that you are going to be alright for this month ( or not, take action now) and it shows what the pinch points maybe in the coming 6 months that allows you to plan your action ahead of time. If your cash flow designer is good it will also contain on the summary sheet, forecast invoicing and sales ledger balances.

And Now ACCA exam results out to day good luck…

One of my students from Moore Stephens and a number from Deloitte have both said a book should be written of stories and sayings relating to accountancy. So perhaps this is the place, as finding a publisher to take it on is probably as remote as  well an accountancy student passing all their exams first time…… So if you have well done and if not no disgrace, just try try and try again.

Beware the friendly chat.

Just recently bumped into a bank manager who it appears was the boss of the bank manager that pulled the overdraft from under our feet in about 2001. This is the story that usually prefaces a discussion on the pros and cons of factoring and invoice discounting verses overdraft.

So here we are the factory is in Cwmbran, the distribution outlet is in Tonbridge (so was home) and the bank is in the Crawley area. It had been a heck of a week. We had completely ditched the old product range in 2000 and as this was imported some of our staff had jumped ship to sell it against us. The new product range was taking off slowly, the cash was going down and the asset base eroding. Non the less future prospects were good, we just needed time.

The phone rings on Monday, its the bank manager who wants a friendly chat about this months numbers. So we arrange for me to pop in on Friday afternoon on the way back from Cwmbran. Great, early finish, cup of tea with lets call him George and home before all the rush hour traffic.

All is well, except that bank managers tea/coffee are never of the greatest quality. Now we’ve known each other 4 years me and George so the “Friendly Chat” takes a while and then it turns with the news ” We need the overdraft repaid immediately” apparently Georges boss has issued instructions. The best part of 200k not a hope. So George is politely informed through churning stomach that we will have to put the company into liquidation and they are unlikely to get a penny.

George never fear has a plan to move us to the banks highly expensive and unreliable factoring arm. Not on your nelly. Told him we would rather liquidate. Remember they can’t force you to these agreements. George was politely informed that we would need 12 weeks to find alternative funding. Let the haggling begin…. We settled on 8 weeks, George had never lost a client and the thought of losing one now gave us a lever.

The restrictions of course were that the directors did not want to give personal guarantees. And why should you? Don’t give personal guarantees unless they are really necessary. Also we needed 3 quotes, due diligence phew all done in the eight weeks… hard luck George business lost.

Everything done and dusted, including some expensive debtor insurance…. All’s well except that 4 weeks later we only did 50k worth of sales in the month………. which for factoring is near disaster but that’s for another day.


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