Accountancy, in its very nature, deals with the history of a business’s performance and where it has been, as opposed to where it is going.
This measurement of the business financial transaction history, is of course necessary, not least of which, is in order to comply with statutory filing requirements for, amongst others, HM Revenue & Customs and The Registrar of Companies.
However, although necessary and important functions, the preparation of historical information, does not assist, arm, or inform the business owner or risk-taker, of exactly how the business is likely to fair in the short or medium term future, either in terms of financing it, and its flow of cash or revenue, coming into the bank account or indeed its flow of cash committed to flow out of the business bank account, to meet its purchases and expenditure.
This information is key to position the business owner, so that he or she can implement strategic decisions, with a degree of confidence, for example, relating to maintaining its current workforce, or to support an expected or minimum level of income, be it through salary and dividends, or drawings in the case of a sole trader or partnership, necessary to sustain his or her standard of living.
What really matters to the director or proprietor of the business, in its day to day management, is what is here and now, and coming down the track, not so much what has happened and in the past.
Of course this picture is nothing new, but with the advent of technology and its impact on all of our lives, the emphasis is changing, rapidly, to real time reporting, this is best illustrated, by the changes, recently implemented, and those scheduled to kick in within a matter of months, by HM Revenue and Customs.
The Business owner, and therefore the accountancy profession, has no option, but to jump in line, to adapt, and embrace the changing commercial landscape.
I am offering a service, termed business advisory, which through the inherent digital availability of recent and current financial data, forecasts the future probable performance, over a forthcoming period, whatever is appropriate, be that month by coming month, or quarter by coming quarter etc; this financial forecasting information can be illustrated in the conventional black and white format, or through more easily digestible charts or graphs.
For example: Budgeting, comparing actual to budgeted revenue and costs, Profit and Loss Forecasting, Product viability and profitability, to facilitate the optimum utilisation and return on economic resources, Cash Flow Forecasting, Break-even analysis etc;
I remember hearing, when I was 16, for the first time, the phrase, ‘tomorrow is the first day of the rest of your life!’ Nowadays, at the age of 60, that saying resonates, for me anyway as a business owner, so much louder.