Business mortality

by admin on April 7, 2006

in General

Earlier today I had one of my weekly catch up calls with Stefan Topfer, CEO of Winweb. I don’t usually write about my clients but during this morning’s call we had a fascinating discussion around ‘business mortality’ (a neat euphemism for insolvency) and the role of the professional accountant.

Stefan takes the view that when accountants divest themselves of performing routine tasks – like book-keeping – they can then more readily move into the role of business advisor. Intuitively that makes sense, is attractive and has positive benefits for all concerned. But the professionals with whom I speak find this much more difficult than it sounds.

Most frequently, accountants question their ability to advise around specific industries. I think this is missing a trick. Most practices have at least one industry segment with which they feel comfortable and in which they have a genuine portfolio. That’s a great starting point.

How about collecting performance data from one of those portfolios and starting to work out relative performance figures? What about asking clients to give their view on why certain figures behave the way they do? Maybe record those in a private practice wiki. Maybe post selected comments as part of your blog efforts as a way of encouraging discussion around topics of interest. What about looking to discover common, qualitative factors that might be early indicators of clients becoming financially stressed? How about factoring in known local conditions? Would that help in stemming the business mortality rate?

These thoughts alone might provide good reason for dusting off your management accounting knowledge and brushing up on your knowledge gathering skills. As a bonus, you’d also gain an edge over HMRC which claims to gather and analyse this kind of data to provide an early warning system for enquiry selection.

And of course there is a lot more that can be done but for now…

Standard disclosure: I have a commercial relationship with Winweb.

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Dennis Howlett

Benchmarking against bought data is a BAD idea because it doesn't deal with local nuances and is an average of averages. This was always the argument most likely to succeed when discussing issues of margin with HMRC. The best data is the stuff you collect. It puts you streets ahead.

BTW - it is possible to create a statistically valid dataset with comparatively few participants. This works where there is a small universe but where you have a reaosnable proportion of that universe compared to others. So for example if there are 10 fish and chip shops in your catchment area and you have 5 of them - that's a very useful dataset.

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Jason Holden

Hmm, an interesting one this Dennis. Stefan is correct of course, but only to a point, in order to divest oneself of the book-keeping task you need clients who are good at it, and lets’ be honest most have good and bad days.

To get round this we have qualified bookkeeper(s) who deal(s) with that side of everything for clients, deals with their questions and problems; and NO I could not survive without that support; clients like it as they have contact with someone who does not deal with tax, business advice or anything other than (everything) bookkeeping.

This way that side of what we do is covered, thus enabling me to add some value to what we can offer our clients.

We do have niche markets that we are strong in and it is these we go for first (and feel more comfortable), but we also go for clients in areas ‘allied’ to what we know more about, this way the learning curve is not as great.

Benchmarking performance, there are many companies already offering you the chance to buy their data, but you quite rightly say when you have a niche area you already deal in you can quite easily benchmark in house and probably to a greater degree of not only accuracy but more importantly relevance to each clients circumstances.

We often compare clients data to gauge how each is performing compared to others, this way with the ‘business advisor’ hat on we can offer a real insight. It’s not that difficult if you have enough clients in a particular industry.

I wonder sometimes is the problem that the time required to do the above is what stops some doing it?

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