Our client, a successful wholesale company established in 2006 originally contacted us in April 2023 having recently moved their bookkeeping software to Sage 200 after outgrowing Sage 50.

Whilst they were comfortable using Sage 50 day to day and producing relevant reports, since the move to Sage 200 they were unable to produce the reports needed both to assist in making key decisions during their expansion and satisfy their invoice financing provider.

In addition, this client had also experienced issues with in-house bookkeeping staff and needed assistance and assurance that the migration from Sage 50 to Sage 200 and subsequent bookkeeping had been carried out correctly to enable meaningful information to be obtained from reports.

Our solution to this comprised of 2 stages – a full bookkeeping clean up and reconciliation followed by the preparation of management accounts to date and monthly thereafter to provide the client with the clarity they needed around their figures to enable informed decision making.

Stage one – financial system review

Sage 200 at this point, contained data migrated from Sage 50 for the first part of the financial year then subsequent manual bookkeeping since the date of migration.

Our first job here was to check bank reconciliations had been done. Upon first glance, bank reconciliations had been completed on 3 out of 4 accounts, with one account never having been reconciled before. When these were looked at in more detail, it became clear that although transactions that appeared on the bank statement were being ticked off and reconciled, any additional postings made in error were left unreconciled on the account – this resulted in the bank balances showing on the financial reports within Sage 200 being incorrect.

Upon re-reconciling the 3 accounts and reconciling the 4th account for the first time, we were able to correct duplicate expense postings (again, resulting in balances shown on financial reports being incorrect and in this case, profit understated) We also found duplicated customer receipt postings – from these findings our client was able to contact customers to request underpaid accounts.

Once the bank accounts were reconciled, we were able to move on to balance sheet reconciliations. We worked through liability accounts methodically and found numerous mis-postings – staff pension contribution payments being posted to insurance, payroll journals being posted inconsistently and credit card machine charges being posted to the director loan accounts.

With proper analysis, correction work and reconciliations we were able to give the client confidence in the data used not only to chase customers for unpaid invoices and pay suppliers from but also to have an excellent basis for the preparation of management accounts to support our client in this period of growth.

Stage two – Management reporting and forecasting

Once the bookkeeping had been brought up to date, our next task was to find out if the company had been operating profitably for the eight-month period that ended April 2023 by producing management accounts.

We did this by careful analysis of sales and expenditure for the period, to ensure there were no errors or omissions. Especially bearing in mind that the company had gone through a period of expansion and investment. It was also necessary to give careful consideration to the accuracy of the company’s stock system, as the stock figure in the accounts was fundamental to arrive at the profit figure.

When the management accounts were complete, it was clear the company had made a loss for the period, albeit a small one, but this was a concern for both the director’s and the company’s bank as the company had previously operated profitably.

The company’s bank were concerned as they were owed considerable funds by the company via invoice factoring.

With our in-depth knowledge of the company and financial operations, we were able to report to bank as follows:

Our regular overheads are currently approximately £xxk and our gross profit margin is xx%.

You will notice that our regular overheads for the period ended 30th April 2023 were £xxk per month on average (vs £xxk per month year ended 30th April 2022). This is because there were a number of one-off expenditures in relation to developing our IT infrastructure during the period ended 30th April 2023.

In addition to the IT infrastructure, we have taken on more skilled people and more property as we develop stage one of our business development plan. We have also invested capital in fleet and IT, this capital investment does not impact the losses, but highlights the commitment to investing and developing the business.

The revenue and capital investment was planned and executed by steadily building up profits over the years and careful extraction of dividends by us up to the 31st of August 2022. With a healthy profit reserve of £xxxk on the 31st of August 2022, it was decided to take the business to the next level.

With a backdrop of difficult economic conditions, this expansion has naturally put pressure on operations and sales. However, this expansion push has settled and we have limited losses (absorbed by profit reserves brought forward) up to this point and the investment is starting to pay off.

To give context here average net sales to 30th April 2023 were £xxxk per month. Net sales for May 2023 were £xxxk (estimated £xxk profit) and up to lunchtime today net sales for June 2023 were £xxxk and projected to the end of June should be £xxxk (estimate £xxk profit) and of course, this will remove the losses sustained so far for the year ended 31st August 2023

We have no reason to believe the sales being achieved in June 2023 so far cannot be sustained up to the year-end and beyond. We now have the infrastructure to comfortably achieve this.

This report satisfied the bank and they continued to provide the invoice factoring line of credit at a crucial time for the company. In addition, the predicted profits for May and June proved correct and with the systems we have put in place, these profits were reported back to the directors/shareholders on a timely basis.

As we continue this relationship, we are now working closely with directors to forecast sales and profits in advance. With close monitoring of these forecasts, the directors can act more quickly to change operations if necessary. We are now able to provide the directors with break-even sales targets in advance of each month of trade. Until our involvement, this was just guesswork for the directors.

In addition to the bookkeeping and management accounts catch-up work, we provide the company with the following statutory services:

• • Monthly payroll and RTI filings

• • Annual statutory accounts and Companies House filings

• • Annual company tax return and HMRC filings

• • Annual self-assessment tax returns for directors, along with tax planning and profit extraction advice

• • Quarterly check of VAT returns and HMRC filings

We are now a key partner within this company with our value-added services and the directors are delighted with our input.