FD's Diary: I guarantee it's wrong

The FD's Diary is sponsored by Exchequer Software

January 28 ' Week end ' budget out.

I wanted to send it with my usual comments like 'I guarantee this is wrong'. But Ops would not let me. He is a spoilsport sometimes.

It took me long enough to persuade him that I can start it with a projected balance sheet as at 1st March so that the cash flow reflects what I expect the real trading position to be. 'How can you know it's right?' he asked. 'I can't' I said, but then pointed out we can't prove anything about just about any of the numbers in the whole thing (well, maybe the rent's pretty OK). On that basis a forecast of where we'll be in month is a better bet than what sales will be in 13 months time. He accepted that.

So off it went to the shareholders with all supporting data.

And I bet the only three things they look at are profit, cash flow and how much of it they get.

Still, I can go home with a relatively easy conscience. Everything else on my desk can wait for next week.

* * *

January 27 ' I've spoken to lawyer's about our chap who is leaving and who clearly intends to take a customer with him

They hummed and hahhed for some time and then suggested there is nothing we can do to stop the customer going. Well, I think I knew that.

And they said we can't stop them contracting with a company set up by our employee because that's not an employment so we can't say they poached him. And I can sort of see the logic in that. It might have been different if we'd been an employment agency, but we're not and we didn't cover all these options in our contract.

And then he said he's not at all sure there's a lot we can really do about the member of staff stealing the client, whatever his employment contract says. Of course there's one precedent that says this, and another that say that, and maybe the facts are closer to one than the other, but how far, he asked are we willing to go to find out? The House of Lords?

Blow that for a game of soldiers. We'll cut our losses and just make it as difficult as possible for him to source product that supports our installation. We aren't apparently obliged to supply him, or our former customer with that in the opinion of our lawyer.

All of which made we wonder why we pay such people so much to draft such unwieldy contracts in the first place if when push comes to shove they're pretty much nigh on unenforceable.

OK, I might be a in a grump because youngest son complained of a tummy ache in the night. He went back to sleep after convincing one and all that without doubt it was just wind, but by then his mother and I had adrenalin running for a trip back to hospital. Which meant it took hours to go back to sleep. But whether I'm in a grump or not I like value for money. And I'm not sure we got it here.

* * *

January 25 ' I've only been out for a week. It feels like eternity. And my desk is providing the evidence. However, I can face it with reasonable cheer. Our youngest continues to do well. He came out over the weekend and was on his feet by yesterday. I suspect it won't be long before he's kicking a ball again.

In view of the delay Ops and I made a practical decision. We'll go for a two stage approach on the budget. First of all we'll present a plan for the remaining business we have ' 4 divisions, not five now (of which more anon, when I've dealt with it). The we'll do a plan for what we want to do. Right now all we'll do is flag that up. That way a real indication of how it changes things will be available anyway, so maybe it's no bad thing.

But even that is pushing me. #3 is a star. AJ is relieved to be here, not in a firm with tax deadlines looming (about which I thank my lucky stars ' what would have happened if I'd been in practice right now and lost last week?) and Ops is being understanding - but a few late nights are coming up. And I readily admit I'm shattered already. Hospital visiting is completely wearing.

The only way out is to take some stuff home tomorrow and do it there ' which also means I can be on childcare duty and let my wife get back to work for a day. Who'd be a modern parent?

* * *

January 21 ' Many thanks to those who have offered good wishes to my son. I'm pleased to say that he is much better today. Indeed, last night, just two days post operation it looked like he was attempting to resume the normal state of hostilities that exists between him and his sibling. I've never been so grateful to see it.

What has perplexed me though is the attitude of some colleagues. Take the CEO for example. Because modern technology means it is hard to be completely unavailable he gets on the phone, says sorry to hear the news, and follows it up with 'where's the budget?'

Delayed I said. I didn't add what I thought.

* * *

January 18 - There are times when work is not the most important thing in life. There are even occasions when the fact that, as I gather, our engineer who has stolen a client is refusing to play ball with our proposal seems a matter of the utmost indifference.

Today is one of them. Now I normally agree with Tony Blair that you should keep your children out of the limelight (if not on much else) but I'll break my rule.

We realised our youngest son was very ill and not just having a usual stomach upset on Sunday night. We took him to hospital and to cut a long story short he had emergency surgery this morning even though no one was sure at the time what was wrong with him.

Have you ever sat waiting for your child to come out of an operating theatre? I hope you never will. Was it Churchill who talked about the longest day? Well, these were the longest 2 plus hours we've ever had.

But he's fine. They found the problem. Tonight his bowel is a foot shorter than it was this morning, but he's around and whining a bit, and so would I if I was him. Best of all, we still have him. But if I'm a bit distracted for a day or two - that's why.

PS The next time someone says the NHS is part of the "unproductive" and "non wealth creating" part of the economy - very loudly put them right. Right now they've created more value for my family than any else could have done in any other way.

* * *

January 14 ' One down. The foreman has said yes ' he wants to do it, and has asked an accountant to help him. Thankfully, it's one I know and who I think is OK.

Sure, there are some issues he wants resolved. In particular he said he wants to buy some stock from us, but has not made clear what. We think what he means is he wants us to set him up with a pile of stuff he'll need for a couple of months and include it in the WIP deal ' but it sounded like he didn't fully understand this either and it was the accountant speaking though him.

But given his indication we've given him another week to work on things before we tell the staff in the division what we intend to do. One sticking point we do have though is that he has to take everyone. He suggested he didn't want one of them. For me that's a non starter. Years ago I learned that this could lead to unfair dismissal claims on the part of the person you didn't transfer. So we're saying we'll do minimum redundancy for them all, and he has to then re-engage them. If he terminates a trial period on a new contract that's up to him ' but we want them all safely off our hands on similar terms.

And now, back to the budget spreadsheets whilst #3 runs the real show.

* * *
January 12 ' And the surprises continue. The CEO and Mrs CEO want a board meeting. Let me repeat that. They want a board meeting. They've said so at the same time. They must have spoken about it!

I guess they've finally noticed that we're only a bit over a month from our year end and they'd like to talk about the budget ' which is something Ops and I have been grinding away on in the background.

Well, if that's what they want, they shall have it. Which means Ops and I had better finish the darned thing and get it to them. The only trouble of that is ' we had hoped to put together a separate element of the plan to suggest how we look for new business. The discussions with the British supplier who we asked to replicate the products produced by the Belgian supplier who we nearly bought part of has taken us in interesting directions. They didn't stop at replication, they've thought up a new way of solving the problem. This gives us an opportunity to sell into markets we haven't tackled before.

So it looks like a few late nights are on the cards.

Oh, and as for Belgium ' they're giving us grief again , this time because we're not ordering enough and they say that's threatening their livelihood, but surely they anticipated that when we took everything we could last autumn? Apparently not. Well at least that's their problem now. We're on an even keel with them financially.

* * *

January 11 ' No news from the foreman ' but we gave him until Thursday when we said we'll have to start the process with his team.

Much more news resulting from Ops' visit to the company who had given notice to terminate their contract just after Christmas. I have to say I realise ops is a changed man over the last year. When it came to getting rid of the CEO, who had been his mentor for years, I had to take the lead. Now he's flourished into being as tough as can be when it comes to getting what he wants.

And he had got the confirmation that our employee who'd given notice was indeed the new supplier, under his new guise. I've no idea what he said, but he'd dealt with the company for some time so I guess that helped.

So, Ops and I were back in action together today. We had called in our member of staff, and now read him the riot act on breaching his employment contract, which is pretty straightforward about working for our customers on his own account.

He was a bit shocked we'd found out ' and that we even knew what his new company was called. I think it was the fact that we could tell him that which made him open up and admit to the truth of what was happening.

And for the second time in two days we then took the interview down a path he would not have anticipated. OK, we said, so you want to do your own thing ' and your contract says you can't, not with this person. What if we agree, but we take 10% of their turnover and any other turnover we offer to you plus 5% of whatever else you get, you trade as a franchise of us and we supply all the materials you need to continue t support them at less than our usual trade price?

Yet again, we had someone leave the office bemused and excited. The offer to supply him is what is getting this chap. Ops had pointed out to the customer that the equipment we supplied had some parts in it which any one but us would have problems servicing (or we wouldn't have been through the whole Belgian problem last autumn). They'd obviously already challenged him on this. Now he can set up his own thing and say he can supply them. But we might make as much as we were from the contract in net terms.

It's an appealing prospect to us. Again, we'll have to wait for him.

The New Year has certainly not been short of surprises.

* * *

January 10 ' The day to tell the foreman of our 'troubled division' that its day was over.

Neither Ops or I were looking forward to this ' because as we had to make clear (which is also in part why we both were there) this was the start of a consultation on his redundancy, and that of his team, come to that. And I don't know anyone who really enjoys doing such a thing.

But we made it very clear from the beginning that whilst we were formally beginning that process our desired outcome was that he took over the division, or that he and his team did.

So, we were upfront. We asked if he'd like outline information on it there and then. We offered to pay a useful sum towards his getting advice on the suggestion (as we'd pay a lawyer anyway if we were going to make him redundant), told him what we'd be duty bound to pay if he was to be redundant and said we'd do that anyway, as we would for the team (so he can take them without employment risk) and then said:

1. he can have the clients;
2. we keep the debt;
3. he pays for the WIP in three instalments on 6, 9 and 12 months;
4. he can hire the kit he needs for the next year payable on 90 days for 3 months and sixty thereafter;
5. we'd loan wages for 2 months, repayable starting from month 6,
6. we'd be paid 10% of year 1 profits, if any;
7. we'd get 5% on all work introduced for 3 years.

There's a risk in this ' but not that much. We'd pay much more than minimum redundancy if we weren't offering them the business, which virtually covers the wages risk. We'd probably lose the WIP, and the exposure on the kit hire is small, with the upside of an income stream back. We certainly won't make much, but we may get out with honour. That's about as much as we'd hope for.

He went away looking a bit shocked, and quite excited all at the same time. Time will tell.

* * *

January 5 ' The Engineer who has quit formed a company in mid December. Its name suggests it may well be undertaking activity similar to our own. All this found simply by checking on his name and postcode on ICC. Useful stuff.

So now we're off to a lawyer to check what we can do about it.

And Ops is off on one of his 'subtle' visits on Friday to see the client who has given notice to see if he can find out more.

But, if I'm honest this move has also got us thinking. I put it to Ops that if these chaps out in the field are as used to planning their own work as they are, and have an entrepreneurial flair ' as this one at least appears to have, why don't we invite them to be franchised contractors? Operating the maintenance team is hassle and we could also offload onto them the need to run vans and so on.

Maybe there's a silver lining in this. So whilst we're looking to protect ourselves we might also be seeing what possibilities the situation might open. And that's not least because we'll have a real problem making a new engineer economic in the area where we might be losing this contract without that work. Perhaps we'll end up sub contracting all our exiting work in the patch to the chap's new company, for the right retainer of course.

* * *

January 4 ' Back to work. What a relief. Call me Scrooge if you like, but when the last guest of the holiday left on Sunday evening I had that tree and cards down faster than you can imagine. Despite all rumours to the contrary I like a bit of routine. Just every now and again I hanker for that chance to do the ordinary things in life. I think I'd even tick a bank rec this morning given half a chance.

Not that such a chance looks like it will be presenting itself. #4 has worked like a Trojan over the holiday and has a list of issues for me to look at as long as my arm. Fair does on her part, but I think I'll be working late to address them.

Then Ops tells me first thing that we received notice on a contract on New Year's Eve by email and mysteriously the engineer who services much of the work on that site, and his assistant, happen to have resigned at the same time. I'm not sure what's more worrying ' that we've lost the work, or that Ops spent the weekend reading his mails. Either way, there's enough of a coincidence here to see whether we have to take some action. We have a clause in our contracts forbidding clients to poach staff, or pay a penalty. And staff have a clause forbidding them to poach clients. First thing to do then is search on AccountingWEB to see if our engineer has been setting up a company.

Then there's the stack of mail on the system to read ' no doubt much of it a waste of time. And snail mail to get through. And before you know it the phone will start with the usual rubbish.

Perhaps I don't like routine after all. More and more I'm pleased we decided to promote #3. She's good at this sort of thing. I need some drama.

PS Thanks to those kind people at AccountingWeb for nominating me for Personality of the Year. I'd like to mention in advance that if you are also so kind as to vote for me that I will not be able to attend in person to accept my award if I were to win. But if I were to do so I would add that this was not an award for me alone, but also for all accountants who have to deal with the daily routine of life. And for my wife, children, Mum, Ops, #3, #4, AJ, #5 and all those other people who made it all possible. And I'd shed a tear or two (sorry ' I made the last bit up).

Did I really begin this mail saying I wanted to do something ordinary? Amazing how your mood can change in minutes!

In December the FD spent much of his time fretting about the Christmas party, and cash flow. But both turned out alright in the end.

For previous installments of the FD's Diary, see:
November
October
September.
August.
July
June
May
April
March
February
January
December
November
October.