Life is tough on the front line of accountancy. For more than five years, our intrepid correspondent has been bringing us news and views from a typical West Country practice.
Say that again?
The scenario: one of my more successful small company clients, trading record going back 15+ years, always makes profits, has never needed an overdraft.
Which is now part of the problem. As an established business he needs to keep up with recent developments, which means he needs to spread his net much wider, perhaps onto the continent, and find new customers and markets. I have been helping him to put a business plan together and to work out how much this might cost. The bottom line is that he needs an overdraft of around £5,000 to develop his website and give him some extra cashflow while he makes the transition away from his established but shrinking traditional market. As a customer of the same bank for life with a good track record and credit score we didn't think we had a problem.
So along we go to the local branch to see the business manager. Now I use that description in the widest sense. In fact he seemed to have sent his teenage son to the bank in his place, or maybe I'm just a poor judge of age .... Anyway he seemed very young!
We get the pleasantries out of the way (I resisted comments such as "shouldn't you be in school" and "isn't it past your bedtime"). My client then presented his case, reminded him what a good customer he had been, never been any trouble, etc. The 'manager' looks over the business plan, although I am not convinced that he actually read any of it. He then tapped a few keys on his computer, presumably to call up my client's account details.
"I notice you haven't been banking any large amounts recently".Yes, we explain, that's why we need to get into other markets. We have good evidence that we can get the business if we have some working capital to develop it. There are some big contracts in progress, but they won't generate cash much before Christmas so we want to get started on seeking other work now.
"Hmm", he says. "I think the bank would be much happier if you could wait until you have banked the receipts from these current sales."
"So you're saying that if we could bank £5-10,000 you would be prepared to offer a £5,000 overdraft?"
"Yes, that's right."
At that point my client asked him to repeat the proposal, which he did in exactly the same words. That's when my client rather uncharacteristically told him, to paraphrase, what he thought of the bank and voiced his doubts as to whether he has been born into wedlock. I hurried him out of the bank before he had a chance to do any damage to anyone or anything and bought him a stiff drink at a nearby hostelry.
So suffice it to say he is soldiering on sans bank finance. He now has a related challenge: he wants to sell his house and downsize, which might involve renting while he finds somewhere to buy. Unfortunately his mortgage is with the same bank that deals with the business. He can hear the bank manager now. "I'm sorry, we can't offer you a mortgage due to your fluctuating income. Perhaps if you could raise the whole of the purchase price yourself we might be able to consider your mortgage application...."
Can someone remind me what exactly banks are for?