Business Management zone

FD's Diary: Did it really snow in Oxfordshire?

January 29 – A second day of snow disruption. I can understand that parents have to look after children when schools close (as has affected some of our areas) and one or two of our maintenance people live in pretty badly affected areas so we’re having problems providing client cover in those parts.

But when the guy who lives in Oxfordshire phoned in claiming to be snowed in yesterday and it was perfectly obvious from last night's news reports that there was not a flake of snow to be seen in Oxfordshire I began to have my doubts about his integrity.

Of course, I can’t consult HR about it, because Mrs CEO still won’t come in to work in case the CEO is in (fat chance) so Ops is going to look into this one.

I’m beginning to wonder whether we shouldn’t consider sacking Mrs CEO for persistent non-attendance now. Perhaps I should ask Ops to deal with that as well!

* * *

January 27 – I’ve been spending time with managers on the budget because I don’t want to think about what tricks the shareholders will get up to next.

Most of the managers are good people – and seem to be trying hard to pull their weight, bring in profits and understand what I need. Frankly, the fact that I’ve sat down with them to talk about what’s going on and how I’m thinking is clearly a revelation to them. The old #1 (for many of them the only accountant they’ve known) shut his door on all of them and never asked about anything so this continuing communication exercise is a massive benefit to me, them and the business.

But one manager is proving to be a right pain. I’ve looked at his division’s accounts for the last few years. After good growth until 2001 it stagnated in 2002 and has fallen back in the last year. But year on year fixed labour costs and overheads have grown. Now it’s getting marginal as to whether it’s making a profit whether central costs are allocated or not.

He, of course, is the ring leader of those who say central costs are a fiction that he should not bear (and with regard to the shareholders, I’m right there with him, which doesn’t help) but he can hardly argue he can do with no accounts, credit control, fleet management, IT and so on which he gets from central admin and which is not charged in his accounts. So, I’ve put it to him that he’s making a loss and he’s got to do something about it.

This has been taken as a personal affront, and an accusation of “what the heck did I know about previous years?” (or words to that effect). But with a bit of juggling I pulled together a five year summary for his division from the dear old #1’s extraordinary management accounts spreadsheet (the only advantage of which was that it had every conceivable piece of information you could ever desire on it, including his inside leg measurement, I think). And this showed that in 1998 he had the turnover he’s predicting for next year and less than 2/3 of the head count, let alone cost. That shut him up.

Now he’s got to prove what all those people do now. And he can’t even claim it’s extra health and safety and the like. We do that centrally too. In his case I’m out for blood – or the end of the division. And I think casualties are likely.

* * *

January 25 – Yes, that’s Sunday. And I like to claim I don’t work weekends. But that just isn’t true right now. Fitting in all that is going on in addition to the usual work load is proving to be difficult.

Friday’s board meeting was interesting. Right now we’re moving into a culture for blame between the shareholders. Everything is the other’s fault. Unless it’s my fault.

It’s my fault the loos aren’t done. Well, yes it is, very slightly, because it took me a long time to get a spec agreed and then to get more than one person to quote on it. But the work starts in February. Which is just not soon enough according to Her Majesty, Mrs CEO. Except nothing at all would have happened if I hadn’t started the process.

And then there is the credit note error in last year’s accounts. That’s my fault because I shouldn’t have gone looking for it. Then I pointed out they signed the accounts, and all before my time so in fact I was trying to prove that what I sought was fair, unbiased results that were as trustworthy as possible, and neither of them knew what to say to that. So I blamed it on the auditor’s instead and have their permission to raise it with them. They’re not the only people who can divide and rule. I can too.

As for the budget, I presented the format – and asked for a special meeting to consider the detail as an interim step before the next board meeting. But I have clearly made the mistake of assuming they care at this moment. They don’t. The only issue of concern to Mrs CEO is why we are going to employ the CEO at all and the only issue of concern to him is how much he’s going to be paid, whether he works or not. And on this, I assure you, they can wind each other up something rotten. So at long last I had to let Ops start to speak and calm the ruffled feathers. Until then I have to say he’d looked rather smug about my discomfort.

There was only one thing that everyone seemed pleased about. And that was the phones. Mrs CEO thinks she’ll be able to log the CEO’s calls. He thinks he’ll cut costs by blocking just about every call everyone else makes whilst allowing himself to do what he likes, and Ops thinks this will really make people accountable. So I scored one rare success in a stressful day.

And what about the accounts, and all the real things that are happening in the business? They were ignored. Ops and I dealt with them later. What a way to run a business.

* * *

January 22 – I mentioned those variances in the December accounts. Sometimes you get that feeling that things just aren’t right. So I followed up one of them.

We had a lot of credit notes in December. In fact we always have a lot of credit notes. That’s the problem of maintenance sales billed in advance. The person gets the bill, and then decides they want to cancel (and after an initial period our customers have that right). Or they’ve sold the business and the new person wants the service, but we need to rebill it, or whatever. That’s life.

But I was beginning to wonder as we began to unravel credit control from the era of the old #1 and the dear departed #2 why there was such a small provision for credit notes in last year’s audited accounts because we seem, month in, month out to be raising more than that provision (some of which had also to be for bad debt).

So, I ran a list of credit notes for this year. Now, last year end (28 Feb for us) the old #1 had the auditors in and out within 6 weeks of the year end. And guess what? There were almost no credit notes in that period. But between mid April and the end of April (i.e. after they’d gone but before the audit was signed off in May ) well over half the over 90 day old balances were cleared by way of credit notes issued. That amounted to about 4 times the provision. And I think it was material in terms of the accounts.

We’d already found the old #1 had been less than truthful with the management accounts last year, offsetting income in advance against debt to make it look like he had debt under control. Now it looks like he pulled the wool over the auditor’s eyes. But, why did they not check this? Why didn’t they realise that vastly fewer than average credit notes were issued in this period? Why was it so easy for me to spot when I began to be curious about it? Why wasn’t there some reference to credit control and the increasing aging of the debt in the management letter instead of the three, completely inconsequential points that were? Did they do a debtors circ? If not, why didn’t they check cash after date on this ropey old debt, which should have been the first stuff to come in, and if it wasn’t in by the time they were was probably doubtful?

There’s a debate going on about the value of audits for companies of about our size right now. This is not a shining example of the value they add. If they’d seen this problem I wouldn’t be labouring under a misapprehension that this credit control problem was all of my making – when quite clearly it isn’t. And the company would be paying less tax and have got onto the issue a lot quicker. The old #1 might have been dispatched sooner too, and at lower cost.

I’m annoyed. And now I have to decide if I want to restate last year’s accounts or take the hit all in this year. Will they offer me any reasonable advice on that? I’m beginning to wonder. Will they offer compensation? There’s another good one to ask!

This could be a useful diversion at the board meeting scheduled for tomorrow. As the shareholders have tabled nothing yet it looks likes it’s pretty much me from beginning to end anyway. I’d better do some vocal training tonight. Or at least soothe it with a bottle of my favourite tipple. I think I need it to deal with these vexations.

* * *

January 20 – Getting accounts done in the midst of the mayhem of the demands of the shareholders has proved a little taxing, shall we say.

I’ve just noted my objectives for the year. I haven’t, so far, kept Mr and Mrs CEO at bay. I think I probably am suffering at their expense; I worked at the weekend and I’m not sure this is enjoyable. How about that for a record of failure?

Still, the accounts are done. My confidence about knowing what’s in them has been reduced because it is clear that there were variances in December which should not be there and which I’ll have to look into. And we have a board meeting coming up and I have (with one heck of a lot of work) got a draft budget format prepared. This is now vital. With the new financial year starting on 1 March we have to have a budget in place according to our great shareholder agreement or we’re not allowed to spend any money.

Of course, that spending ban would, it seems include their salaries. I suspect that as we get to March there might be some movement on what goes on. But interesting times remain ahead. And the nuisance of the pressure is that I’m going to have to keep central control of the budget when I’d much rather have spent time getting each divisional manager working out for themselves what they wan to do because I genuinely believe bottom up budgets are best – except, that is, when you’re in this situation.

* * *

January 16 – I've just read some of the stuff about IR591. We’ve got some guys in the maintenance division who work through limited companies. They’re really self employed in my opinion. We don’t guarantee work. They supply their own kit and vehicles. They are free to work for others. We make sure they’re insured in their own right. They can substitute other people (and do – mainly between themselves I admit, but we don’t argue when it happens as long as they arrange for the work to be done). They can (and I think they do) work for other people or some of them certainly wouldn’t be earning much but we wouldn’t have nationwide coverage.

How they pay themselves is not my business. But I’ve got to say that IR591, or what I read of it, does seem pretty unfair to them. They’ve not got the benefits of being employed. They’re running real businesses. Why are they being treated less fairly than real businesses?

Come to that, now I think about it, we’re a close company. We pay dividends. And no one could say we’re not a proper business operation. Our main competitor is a subsidiary of a quoted plc. Why should their shareholders have a tax advantage over ours (God bless them)?

There’s something very cock-eyed about this proposal which doesn’t feel right to me.

OK, now I’ll get off my soap box and get back to work.

* * *

January 15 – Light relief. Our IT bod has been doing work on phones. Conventional systems seem old hat compared with what’s possible with IT now. Had a demo on a system called Swyxit. I loved it. Flexible. All IT. Easily expandable. Easy to back up. Hot desking a doddle. Personal direct dialing wherever you are. And reasonably priced.

Still looking for the downside, but it seems like an answer to my prayers right now.

And making people responsible for answering their own phones will be a revolution here – we might even provide some customer service if that were the case.

* * *

January 14 – It’s been heavy going.

The good news is that one serious old debtor coughed up. Which is a major provision I expected in the accounts that has been avoided.

The bad news is the shareholders. Where do I start? I guess the shareholder agreement would be a good place. This turned up yesterday. It’s a classic. Either the shareholders agree on all significant things or nothing can happen. Of course there is a deadlock clause, which is that we refer it to a chartered accountant for them to decide. But that’s it. Ops and I don’t have a vote on over 20 issues which the shareholders reserve for themselves.

Well, that was good to know. But it helped in one immediate way. Because one thing one shareholder can’t do without the consent of the other is sack each other. Or, come to that, sack anyone even in the event of serious misconduct unless proper procedures have been followed. And although Mrs CEO might say the CEO committed gross misconduct neither Ops or I are willing to ask #4 if she thinks he did (for fear of the can of worms that could open) and so we have no procedure we can use, because she has to make the claim in the event of harassment according to our lawyer or he has the benefit of it being an accident (as he has always claimed).

So very carefully we’ve had to tell Mrs CEO we can’t sack the CEO for the reason she’s requested.

And because we have to be fair in all things, we’ve decided, we had to tell the CEO what we’d done. So she’s daggers drawn with us and he thinks we’re his allies and comrades in arms. Which, as we reckoned beforehand, is the way to go. Divide and rule I say.

Thankfully Ops is getting the work in and done whilst all this is going on and, debt apart, accounts is going OK. Well, accept for the fact that we finally got round to canceling the “paid by number of working days in the month rule” as from the start of this month (as we use a calendar year for holidays we thought this might as well happen to coincide) and half the company thinks it’s been diddled out of one or two days pay as a result. So we’re having to keep all of them quiet – and prove that as far as I can see it’s just not true. In fact in some cases it looks like they owe us. I’ve told a couple that this might mean I’ll be reclaiming some cash in the event of more time wasting. That might stop those beating a path to the door. Where’s the HR director whilst all this is going on? Ah, that’s Mrs CEO of course. I think we’ll say she’s on compassionate leave right now. And maybe that’s the way it should stay!

* * *

January 12 – Two problems. Ops wants Tree Ferns back by the end of the month. I know she’s here to work for him and I know I got her because they were slack for a couple of months, but she’s darned useful, cheap, cheerful and has that extraordinary quality of having common sense. We need her more than he does. I can see a bidding war starting over this. It will be a bore to have to do without her. I know we were meant to go down one in numbers when I sacked #2 but it’s turned out we need the hands – and she’s vastly cheaper than him, so worth fighting over.

And we have another fight on her hands. Mrs CEO has asked that we sack the CEO on the grounds of gross misconduct at the Christmas party. That’s a good one! So now we’ve asked the shareholders for one other thing (since the shareholder agreement has still to appear) and that is access to lawyers in our own right.

What’s curious is that she, at least, does not feel able to sack him in her HR role. So for some reason she feels dependent upon us to do the dirty. That’s comforting, in a strange way.

And there’s one other issue. #4 is back at last, is clearly happy (what a relief, problem over there I think) and there’s no hint of a complaint from her. And since Mrs CEO did not witness the event she can’t be the witness who demands action.

Fun times are really here. But at least some cash came in today – some from last January from one of our large customers who proudly publishes their payment record to suppliers in their annual report as being under 45 days on average. Some people must be paid very quickly at this rate!

* * *

January 9 – The flu continues. But there was some good news. The board meeting is not going to happen, yet. Because Mrs CEO has not agreed (and nor has she been seen at work) and because Ops and I still have not got the shareholder agreement. So, since we understand the company is a party to it we sent both of them a formal request for it today. Politely worded, of course, but we want to know just what we’re meant to be abiding with.

And there was even better news. You ask for inspiration, and you receive it. The idea of charging the accounts department out on a transaction basis is so simple it’s obvious. I kick myself for not getting there first. Had a meeting with #3 and in fifteen minutes we agreed 30% of our work was on sales, 20% each on purchase ledger and payroll, 10% on stock and assets and the rest (she says) is me (whatever I do, she says). So we split me 5 ways between the divisions, and it took little longer than this to guess the relevant weightings of each of the other categories by department and in less than half an hour all in we had a formulaic basis for allocating the accounts department’s costs between bickering departments.

Of course, we could have brought in a consultant and spent £10,000 to obtain something refined by a percentage point or two, but instead I just ran this by Ops and then sent it out on an e-mail and curiously, because it’s so simple, the feedback has been good.

Nice to solve a problem every now and again and have a good argument available about why we’re of worth (at least in our opinion).

* * *

January 7 – How do you account for overheads? The budget process is under way. We have five divisions and everyone will accept their own costs but no one will accept anything else. And anything else includes accounts for a start.

Now without central admin they all look in quite good nick. But as I pointed out to one guy who runs the division that sends out lots of small invoices and is giving us the most debt grief, without him I’d be a lot better off. I have a feeling the sentiment was reciprocated but he had the sense not to say it.

It would be tedious to have to work out a formulaic basis for recharging – but on the other hand people have to realise that their decisions have ramifications beyond their own divisions. All inspiration gratefully received. And I don’t want to go down the line of full activity based costing.

A lot more tedious is the request for an emergency board meeting on Friday from the CEO. Ops and I initially agreed subject to Mrs CEO both doing so and her being there. This inflamed the CEO to accusations of bias on our part. I quietly pointed out that we’d do the same for him if she’d asked for the meeting and he saw we had a point. When he had calmed down he also saw my point that requesting an emergency board meeting without saying what he wanted on the agenda was not likely to lead to the agreement of his once dearly beloved. So we had to get him to say that he wanted to discuss how the shareholder agreement would work now.

At this point Ops and I said sight of it by us would undoubtedly help progress in the discussions to be held. Again the ballistics flew. And once more they had to be diffused. But he didn’t give us a copy. He only said he’d think about it. So right now we’ve said no to a meeting on the basis that we’ve had insufficient notice of the matter to be discussed.

Oh boy. Fun times are really here.

* * *

January 6 – Well I might still have the flu everyone else seems to have, but unlike everyone else I’ve at least made it in here.

Is it mayhem? Yes – because so many are off sick. Including #4 – but #3 tells me that rumour has it that my first wish for the New Year might have been granted. It is suggested she met a new man over Christmas. I hope so!

The CEO has not been hiding. He came to see me this morning. Apparently my predecessor did his tax return for him. So he thought I would. Now as far as I am concerned those days are well and truly over. So, as politely as I could I suggested it was worth his while using our auditors for the job. Perhaps they could save him some tax, I suggested. They probably can’t, but they can save me some hassle, and the bribe was enough to get him to agree that I call them.

I can’t say they sounded over the moon about picking up a new client today, but they could hardly say no, so that’s one problem off my desk. And he went away happy.

I wonder if Mrs CEO will be in with the same request soon?

In the meantime it’s back to appraising how much cash came in over Christmas and realising that the season of goodwill towards the overdue is well and truly over. I think some heavy pre litigation letters are about to go out.

I’d phone them except I now fear that any call might be the last on this system. The IT guy is now briefed to get me as many specs on new systems as he can asap. Which might be a little light relief compared to the rest of it.

* * *

January 2 – What a relief to be back at work. I didn’t mean to come in, but I wanted to escape. Mrs FD has spent much of Christmas fantasising about a new kitchen and much as I love her, there are only so many hobs I can take at a time. And I’ve had flu too – including two days in bed. I just want a touch of normality. Not that this place is likely to provide much if experience to date is a guide to the future.

Today though it is quiet – and time to work out a few objectives. I’ve always believed in New Year Resolutions – the best substitute for a full blown business plan I know of in my opinion. So, here are mine:

1. get the management accounts out on time, all year
   
2. by the end of the year be sure I understand where we make money and where we don’t, and be able to do something about it
   
3. get a budget in place in time for the new financial year – a real budget that is, based on a clear business strategy with more than a wing and a prayer to support it
   
4. build a solid accounts team
   
5. prove that the accounts department have added value to the business (if only be getting the debt in)
   
6. keep Mr and Mrs CEO at bay
   
7. make sure I do not suffer at the expense of Mr and Mrs CEO (or I’ll change all the foregoing and quit, because there’s only so much grief worth taking in life)

and less importantly, but still significantly:

8. get a new phone system
   
9. finish the loos
   
10. get a PDA
    
11. have some time off
    
12. enjoy life.

And I can always hope #4 has been swept off her feet over Christmas. That would help.

The New Year couldn't come soon enough for the FD following December's drama's, which included The Evening Dress Incident involving the CEO and #4 at the staff Christmas party. Follow the whole saga through the preceding months:
November
October.

Number of comments: 13