From bright future to horror story
Fraser owns a successful lighting and electrical contracting business serving Scotland and Northern England. He runs a fleet of around 80 vans and employs 25 staff at his Head Office. Managing a company with over a hundred employees is demanding but Fraser relishes the challenge and is proud of the reputation he has built in the industry.
He has worked hard to establish a team of highly skilled, loyal employees who understand the company’s aims and take pride in delivering a first-class service to their domestic and contract clients. The business has won numerous awards and Fraser has profit in the bank to prove their success.
The finance team comprises of Marie, the company accountant, and Claire and Tim who run the purchase ledger, deal with credit control, take care of the monthly payroll and generally look after the financial compliance and reporting obligations of the business. Although the finance team is small, they are mighty! Nothing spooks them when it comes to keeping the company books in order. They pride themselves on the annual ‘clean reports’ from the company’s auditor.
Storm on the horizon
March this year was very busy for them. It was the end of the financial year for several of their large corporate clients, many employees were hit with a particularly nasty flu bug and Storms Isha and Jocelyn caused havoc across the country. Flooding and ice were a problem for the vans at a time when customer calls went through the roof. The whole team worked long hours to keep the vans on the road and get customers re-connected.
Crashing down
Early one morning, late in the month, rushing to get a head start on the day, Marie skidded on black ice and crashed. She was trapped for hours while her rescuers worked to free her from the wreck of her car. Once she was transferred to hospital doctors advised she would be facing months of recovery and rehabilitation.
Fraser was shocked and upset by the news. Marie had been part of the team for over 15 years and knew the business inside out. She was his right-hand woman – proficient, knowledgeable and 100% reliable. However, he still had Claire and Tim who could hold the fort in her absence.
Unfortunately, Fraser didn’t completely appreciate the extent to which Claire and Tim relied on Marie. Yes, Tim processed the payroll but Marie kept an eye on small but crucial details which needed to be taken into account every pay run. Claire would make the calls to customers chasing payments only when Marie gave her the nudge. Fraser should have seen it coming, but they were so busy. He was helping the sales team get two large tenders over the line, plus he was in advanced negotiations with a client whose contract could potentially take the company to the next level. He was stretched to the max.
Grave warning signs
The first crack was small but should have been a warning sign. Two teams didn’t get their March overtime in their April pay. They were disgruntled but a reminder about Marie’s accident calmed them down and the company gave them a wages advance until it could be sorted out in May’s pay. May seemed to go smoothly but by June Fraser discovered staff still hadn’t received their P60s – the deadline for employers was end of May. Fraser was missing Marie but she was still very ill.
Then Claire came knocking tentatively on his office door one morning, bringing him a sizable VAT assessment. With everything that had been going on, they had missed the filing and payment deadline for the VAT return. Fraser picked up the phone to HMRC to try and sort things out.
The deadly domino effect
By August, Fraser was desperate. His trades staff were threatening to quit and he had received a notification from ACAS that one of the call handlers had reported the company for non-compliance with National Minimum and National Living wage rates. Marie kept track of when the NMW rates and Joint Industry Board pay rates needed to be increased and they had missed the rate changes.
Then they were hit with a fine for non-submission of the company’s P11d forms. Next was a worrying letter from the Pension Regulator too, about missing pension uploads. Fraser was feeling that it couldn’t get much worse when the demand for two month’s unpaid PAYE and NIC came through. And because credit control had dropped to the bottom of the task list since Marie’s accident, the company’s cash flow was starting to show the strain. He knew he had to take action quickly to save the reputation of the company and get cash flow back on track.
Fraser recalled attending a Chamber of Commerce event at the start of the year where he had met Janie, a specialist in payroll and financial outsourcing. Janie explained that while many businesses are reliant on just one or two staff to take care of the accounting, with outsourcing, a business has access to a team of finance professionals, qualified accountants and experts in fields such as payroll, VAT, tax and accounting compliance. At the time, Fraser questioned why companies would pay an outside firm to do payroll and finance administration support rather than employ their own people. To him, it didn’t seem the best way to do it. Surely it was better to have your own in-house, loyal and experienced team rather than rely on a third party?
Switching the lights back on
We know from our own experience of running a successful outsourced finance department that many employers and directors chose to outsource because it can offer a strategic advantage, ensuring compliance, efficiency, and greater peace of mind. Our team, led by Partner Elaine Cromwell, provide a virtual finance department service to clients both for short-term cover or on a permanent basis. With a team of specialist payrollers and finance assistants, headed up by qualified accountants, our team provide more extensive cover than the average small to mid-sized in-house finance team. Our firm’s strength lies in our collective knowledge and experience. We invest in continuous training so our team are knowledgeable in the nuances of payroll and financial compliance across a range of industries.
With outsourcing, employee absence is no longer an issue and the use of service level agreements to document things like the expected turnaround time and costs of service ensure everything is clear from the outset. Using technology to help control tasks and workflow, Elaine and her team make sure deadlines and clients’ regulatory obligations are met on time. We can even take care of clients’ staff wage and supplier invoice payments, since we are a BACS authorised bureau, and undertake regular credit control for clients too. We have a strong focus on data security, fraud prevention and internal control procedures to ensure the threat of cybercrime is mitigated.
By partnering with a reputable outsourcing provider, businesses can navigate the complexities of payroll and finance while allowing owners to focus on their core operations, and drive growth. Or for the likes of Fraser (who would want to keep Marie’s position open for her but needs help to sort things out in the meantime) our team can support him in the short term. Avoid your own potential Halloween SME horror story this year – don’t be having payroll or finance compliance nightmares. Contact Elaine Cromwell for a free, no obligation chat at ecromwell@thomsoncooper.com.
Elaine Cromwell is a Partner at Thomson Cooper. She heads up the Outsourcing department, specialising in assisting clients with their finance function including payroll bureau, PAYE, payments and VAT. Elaine advises clients regarding internal controls, processes and systems.