Case Study: Outsourced Accounting Partner!
Following on from a recent blog we issued in relation to having an outsourced Accounting Partner for your business we have had some questions on the practicality of this and how a business owner might get a return on this investment. “How will this help me grow my business?” was very important question which we were asked.
In order to answer this question I have decided to outline below a case study……“true story” as a good friend always says to me when they are starting one of their stories!
Background of the client
We were approached by a business owner who wanted to know how we could help them increase their bottom line. After meeting with them we discovered that there were a number of ways that we could help streamline their finances and plug up inefficiencies in the business.
They ran a very busy bar and restaurant but had no idea if they were profitable or just being busy fools. This is quite common for many SME business owners. The traditional accounting model was very much in place i.e. year-end accounts done 6 to 7 months after the year end, those accounts only used for compliance/taxes and lovely bound accounts issued when everything was complete which went into a drawer to gather dust! There was no monitoring of figures (or the “accounts”) for the rest of the year and even the year end accounts were not really analysed in detail.
Running this type of business meant they had two main revenue streams – Bar and Food – but no way of knowing where the revenue was coming from or if the expected margins were being achieved from either of the revenue streams. Knowing information like this is paramount to developing your business, either by developing the revenue stream that is making the most income, or by either cutting or redesigning a revenue stream that isn’t making as much income as hoped. This is true for any business.
How are you meant to fix a problem if you don’t know it exists?
What We Did
We came to the agreement of putting in place a three-month project. During this project time we took control of their bookkeeping. In doing so, we were able to learn all about the business and the revenue streams of that business. We ensured that revenue was recorded separately for each revenue stream and that the direct costs (i.e. the inputs – alcohol and food ingredients) were also recorded separately.
It was also quite straight forward to get a handle on the wage costs of the business each week – again split between those who worked for either revenue unit or by splitting the costs of those that overlapped.
At the end of the three months, not only was the reporting of the business split between the two main divisions, but also we had three months of data to look at and compare to see trends. Very quickly the business owner could see that food margins were too low due to incorrect plate pricing and also lack control over portion sizes and that the labour rate percentage (this is the percentage of wage costs to turnover) was far too high. On further review this was due to how staff shifts were being set up with an unnecessary overlap at certain times of the day.
Money was literally being thrown out the window! The busy business owner was not maximising their return despite the 60 to 70 hour working weeks.
Changes were immediately made to improve the day-to-day running of the business that enabled the company to save a huge amount.
The client was able to add significant profit (money!) to the bottom line. This was only possible by the identification of the issues that was discovered by us becoming the “Accounting Partner” of the business.
If you’d like to see how we could help you increase your bottom line, contact us today.