Product Differentiation

I was looking a couple of weeks ago at google maps and the number of accountants that are listed. There are a lot of accountants in the West Midlands area, so the competition from rival accounting practices is fierce.

Any business that has too much competition, either needs to be cost efficient or offer a different service to that of it's competitors. Competitive advantage needs to be gained. Our pricing structure is well below a lot of accounting practices as we have less overheads, we don't have a shop on the high street, we work from an office block in a reasonably priced area. We are cost efficient.

We actually started up Et Voila Accountancy Services Limited with this in mind. Our whole business plan was to act more like business advisers / consultants than just accountants. If clients just want their accounts done for statutory filing requirements, we will do that, however we do offer a lot more. We offer support to our clients who are often directors of small businesses. We aim to tell them when their business is financially weak but put in preventive measures so the business recovers before the bank manager gains too much interest! In this financial climate, you have to keep a keen eye on the businesses finances. It is no good picking this up, when you are in a really sticky financial situation. I would rather make directors aware before they find themselves in such a situation. Even if the business is doing well, it is all still about maximising the amount of money that goes into a business owners back pocket.

The problem is that it is very difficult to get in front of the right people in order to sell this premium service. A lot of companies get accountants early on and then if you want to offer them something a bit different, they are sick of people trying to sell goods and services to them, so they are not willing to listen. "I have got an accountant" is the usual response. Our company is not the only company that suffers from this scenario or the only industry.

In this case you need to rethink the situation. It's no good trying to "flog a dead horse", it won't go anywhere! Most of our work comes from networking or recommendation. When companies thank me, I ask if they know of anyone else who would be interested in what we offer. The business is growing.

Most sensible people that I talked to when I started an accountancy practice a year ago, from scratch with no customers, thought I was mad. However, I was determined to make this work. That is a strong message to all business owners, be determined and it will happen. However you need to make sure that your business pays you more than what you were paid previously, when working for someone else. I say this all the time to my customers. Why work for yourself and have the extra risk, if you don't get rewarded financially? You need to look at this while forecasting. I need to follow my own advice and the problem is that I was on a very good salary! Plus my fellow director/shareholder needs paying too.

Therefore, I have identified a couple of markets that I think that we can enter into, that will help us grow more quickly.

From the telemarketing stance, the only way you are going to get people to listen to you is by offering them something that they really do need. We have developed a late filing service aimed at directors that need to get accounts filed quickly in order to escape expensive penalties that often cost more than our accountancy fees! Plus if you offend in the first year, the penalty doubles in the second year. Not every business owner has time to focus on their accounts. They can be too busy concentrating on other issues. There is nothing wrong with this, providing you find someone like myself to help.

If you are making lots of money the last thing you want to do is bother finding an accountant. However,we can step in and sort everything out, relatively quickly to avoid that penalty and with as little hassle as possible. I keep my clients accounts up to date, so if we have an emergency filing deadline from a new client, it can be dealt with, without inconveniencing my current clients. We have sufficient staff to deal with it.

We are also going to be offering a credit control service that will be run separately to Et Voila by my business partner. This is a market with a lot less competition and one that we have a lot of experience managing.

I hope that using our company as an example, you can see how you can successfully differentiate your product/service offerings in order to make sure that your top line (sales) is high enough in order to maximise what goes in your back pocket. Profit is important and yes you need to be cost efficient but sales are important in order to generate that profit. If you don't sell enough you are not going to make money. If you can't generate enough sales in one area, create other income streams but don't loose focus. Try and create products/services that compliment one another. Don't create too many, otherwise you will not have sufficient resource to service these additional offerings. To do things well you need the required resource.

Know your numbers - 3 Tips to Run a Business

1. Know your numbers off by heart, i.e If you were asked the question, how much do you need to sell to break even, can you answer it, without checking? Do you know the point where you cover all your costs and start to make money?

If I ask how much have you sold this month? Would you know roughly how much. I know how much Et Voila Accountancy Services Ltd has sold, how much we need to Break even and what I forecast to sell for the next 3 months. It is not a bad discipline to get yourself into. You can also then decide what profit/loss will be earned and if you are not happy with the answers, you can do something to alter it.

It would help if you do a list of all your orders which you can invoice. Then work out what your costs are and the profit that should yield.

Keep the figures realistic, it will be very demotivating if you make your forecasts too high and you don't yield the profits that you are expecting. If you are not happy with your forecast put a strategy in place to increase the sales to the desired profit.

2. Know you bank balance, know when money is coming out and when it is coming in.
Do a list every month of the balance in the bank, then list down what has to come out and what you expect to come in. Prioritise payments to suppliers, so if your customers pay slower than expected you can match customer payments to supplier payments. Then your cash flow will not suffer.

3. Know your customers. This is going to show how much risk you are putting your business under.You need and deserve to get paid. Credit check them or buy a copy of their accounts for a £1 from Companies House.

Also look for worrying signs, even if you have been dealing with this client for years. Examples are putting payment off for longer and longer, reducing staff numbers, making other cut backs.

Credit Checks give a score, which enables you to decide whether you want to trade with the company on credit terms. Don't be afraid to deny credit as a lot other suppliers to that company will be doing the same thing, if the business is not credit worthy. Credit worthiness depends a lot on the financial state of the company and whether the company has had any county court judgements lodged against it. From the credit check you should be able to see some accounts information. The more assets the company has the more healthy the company is. The higher the value of creditors (money owed to various organisations), the less healthy it will be. The balance sheet total gives a lot of information, you can see the net worth of the business. If it is negative then warning bells should ring.

Sally Wainwright ACMA Practising Accountant and Managing Director of Et Voila Accountancy Services Limited www.et-voila.co.uk

Business Systems

Proper robust business systems need to be in place, even for smaller businesses. I remember years gone by when I worked in Industry, we had a stationery supplier that quoted us "happy" every time but invoiced a completely different price! It amounted to around £15-20 per invoice but over the year, it would have added up. As I had a purchase order system in place, I noticed and disputed every invoice. This delayed payment, helped our cash flow and we only payed what they quoted. We made the whole situation advantageous to ourselves.

If we had not raised a purchase order each time, we would not have known. It is not that difficult to do. If you are sent a quote, you can add an order number and file it. This is the best way to do it. Then if your supplier, disputes the prices they have quoted at a later date, you have a record to show otherwise.

Businesses also need to check delivery notes to invoices and make sure that the delivery note matches to what you receive.

It is like at the bank. You ask for £100.00 from the lady behind the counter, she always counts it out for you. If she didn't, would you not check it before you went? You need to do the same with goods coming in otherwise you may be missing some of what was ordered, preferably while the delivery man is still present. Mistakes happen but why should you pay for them?

I would also suggest getting 3 quotes, when you order anything because it is surprising how much money can be saved. It helps to barter. The Internet is good too.

"Well, the other supplier could do it for X?"

"I will do it for £20 cheaper, do we have a deal?"

However, remember that goods and services at a cheaper cost are not always the best. You could find an accountant, for example, that charges a lot less than others. However, do they know what they are doing? Are they going to put as much time into helping you? If your fees cover what you save your client and you help their business to grow, your client is gaining. I am using this as an example, because I have seen some examples of where clients have gone for cheap accountancy solutions and it has cost them dearly. They have given HMRC thousands of pounds unnecessarily. It is false economy. I am not the only service provider that will see instances of false economy.

Hope this helps,

Sally Wainwright, Managing Director and Practising Accountant http://www.et-voila.co.uk

How to run a sucessful business

In September of last year we started up Et Voila Accountancy Services Limited ( www.et-voila.co.uk) and I embarked on a new journey in my professional career as an accountant.

However, I learnt fast that one of the key elements that every business needs is to be financially aware of what is going on. I think I took that for granted within my own Company but I have learnt from my clients how important it is. Therefore I decided to write this blog to give advice to all businesses, not just start ups, on how to progress. Some of this you may already know but I hope you will gain something from it.

Firstly, you need to set yourself goals, you may not have a boss breathing down your neck wanting to set targets for you but you need to be hard with yourself. As in if you need to say, where do I see myself in a years time? You then need to plan to get to that point. Set yourself a bit of a challenge, push yourself. For example, if you are turning over £50,000 and you want to be turning over £60,000, set yourself a target of increasing sales by £1,000 a month. Then you need to work out what you need to do to get this increase. Then monitor it. For example, how many referrals do you need? I am a firm believer that if you are determined enough you can achieve it. You need to set realistic targets, but it can be done.

However, it should be noted that turnover is not what is going to make your business profitable. Cash is king and this cash in the form of profit, is what goes into your back pocket less the tax. I would recommend to anyone that has clients that are taking a while to pay to use Money Claim online, www.moneyclaim.gov.uk. You can use this to issue a County Court Judgement against your customers and the cost is £25, which they have to pay if you win the case and you can charge interest on the debt. This is last resort as you don't want to loose the client but don't be afraid to write letters to your customers threatening this, you have worked hard and deserve to be paid. Start with an friendly call and gradually make your demands stronger as time goes by. Stay professional but explain you have bills to pay. That is another target you should set, what percentage of debt against turnover remains outstanding on a monthly basis. Try an beat it each month.

Then you need to look at cost. You could be making a fortune but this element still applies to you. For example if you could have free banking and you are paying £20.00 a month in bank fees, well it is not much is it.... a few pints down the pub. However, then look at it over a year, £240.00, even after tax, think of what you could have. As a female this is not hard, a spa break, a flight to Paris, a new outfit.... well it all adds up. Stationery is the same, phone bills, electricity, have you shopped around? Every little helps....

I also strongly advise monitoring where you get your clients from. Companies can spend a fortune on advertising and not get much from it.However, I am not adverse to advertising because it can bring you work. Experiment find the best ways....

I hope that helps and if you have any queries please get in touch....

Sally - Managing Director and Practising Accountant 0121 226 3601