How does your business compare to others like it?
By Andrew Isaacs, CIMA Member in Practice ·
Your accounts can show exactly how you compare with businesses like yours, on margin, staff cost and cash tied up. On its own a number tells you little; against your peers it tells you where the gap is. AI Finance Partners reads every year end against businesses like yours and hands it back with the two or three things that would move you up.
What can your accounts tell you about how you compare?
Your accounts carry far more than a filing. They have got everything needed to show how you stack up against businesses like yours on the numbers that decide whether you are winning: your margin, what your staff cost as a share of income, how much cash is tied up, your overheads. Hardly anyone reads them that way. The accounts get done, filed, invoiced, and never opened again until the same time next year.
That is a waste, because a number on its own tells you almost nothing. A profit of a certain size is neither good nor bad until you know what a business like yours should be making. Finding out you earn less than the firm down the road, and why, is worth more than any set of accounts filed on time and never looked at. A comparison turns a number you cannot judge into one you can do something about.
Fine next to what? Without a comparison, fine is a feeling, not a fact.
What do you do once you know where you stand?
You pick the one or two places where the gap is widest and work on what sits behind them. A handful of comparisons tell you most of what you need: how much the business makes for its owners next to its size, what your people cost as a share of income, the cash locked up in work not yet paid for, and overheads as a share of income, the quiet creep that eats a good year.
The reason an ordinary accountant does not give you this is simple. Getting the numbers filed is the job as they see it. Lining you up against businesses like yours and handing back the things worth doing is a different job, and it is the one that changes anything. AI Finance Partners reads every year end this way as a matter of course, and you can see how we work with small businesses here.
Andrew Isaacs is a CIMA Member in Practice and Practising Certificate Holder, and the founder of AI Finance Partners, the outsourced finance function for professional services firms turning over £500k to £5m across the South East. Legal cashiering is not part of what we do.