ACS workbook: Checklist for Financial Management
This week my PARiM Workforce Management Software blog looks at the Financial Management part of the SIA’s ACS Self Assessment Workbook Guide.
If you’ve missed the first three blogs then these can be found on PARiM blog page. As I have mentioned before in this series of blogs, I am attempting to simplify and suggest ways to help your company meet the requirements as laid out in the Self Assessment Workbook Guide.
Ok, so the 4th Criteria of the SIA workbook is Financial Management and, having done some accounts, albeit many years ago, I should be able to make sense of this for you and perhaps steer you in the right direction to understand and save some time fulfilling the conditions of this criteria. Now, it may be because I know a reasonable amount about this area or I just waffle on but this blog is sufficiently long that I have decided to split it into two.
This first part will cover financial strength, accounts, budgets and forecasts structure and payroll. The second part will cover payroll, financial procedures, the details of which ledgers to keep, insurance and market benchmarking.
Financial Strength & Resources
So the section starts with 4.1 which concerns how your company or organisation demonstrates that it has suitable financial resources to meet its financial obligations and plans.
In simple terms this means that you need the numbers in your financial reports and accounts to demonstrate financial strength and longevity.
When you start a business you should always have detailed financial plans that include profit & loss, balance sheet and a cashflow. This original plan needs reviewing regularly, updating and revising as you trade. You or your accountant will have prepared these numbers and can help with updating them. The cashflow and balance sheet reflect the profit performance of the company and together they demonstrate its financial strength.
Make sure you have enough cash to start with and that the business will generate enough to meet your business plans for the future. Address any potential shortfall early, whether that means going to the bank and agreeing an overdraft (goes without saying that this is a much harder and slower process now) or funding it yourself as a shareholder or approaching an invoice discounting provider or factoring company.
Financial Accounts
4.1.1 Is about being able to present two years worth of filed accounts and/ or show the availability of funding in order for you to achieve your plan’s stated aims.
So, by example, if you have only been going for a couple of years then you’d be able to meet this criteria with initial management accounts or 6 month audited accounts together with a letter from the bank authorising an overdraft that covered your cash outlay over the next couple of years, or a letter of financial support with evidence from the shareholders.
The SIA Criteria then breaks this down in terms of evidence dependent upon the longevity of your company and level of achievement:
So for the first level of compliance/ achievement, companies operating for:
Longer than 4 years you need 2 year’s worth of accounts plus proof of funding availability
Less than 4 years you need to show accounts for the years since start up plus proof of funding availability
Newly created businesses need to show availability of funding
This section then goes on to define achievement levels of “financial awareness” for businesses. In terms of this kind of information and data, in my opinion, all companies, whatever size and period since inception should have this kind of data and reporting set up, as not only can they be good indicators of a businesses’ strength but negative movement can immediately highlight areas requiring remedial action
So for the initial level of compliance the business must show that there:
Is a link between the financial plans and related activities such as marketing, customer service delivery and your business improvement process. The link can be in terms of % of turnover (sales) but for marketing it depends upon how you “win” your business.
Is a proper and robust financial forecast for the business covering all keys aspects of the business
Are NO outstanding county court judgements against the organisation OR its directors
For the next level a business or organisation must demonstrate that:
The company has filed its annual accounts and returns on time
There are financial forecasts covering every aspect of the business (detailed budgets and financial forecasts with notes would be sufficient)
There is a clear structure, supported by systems and authorisation levels showing how the business finances are managed and controlled
As a management team you have sought out your credit rating and it is regularly monitored. There are several free/ cheap services that will run and monitor your credit rating and that of your competitors and customers. It can be a good flag for problems or issues but is usually based on a level of historic data that you yourself would be aware of first e.g your customer/ client can’t or won’t pay you on time and that’s unusual
Proper financial systems to record ALL revenue or income streams exist – invoices being produced, recorded and paid off. Simple accounts packages all do this. I have used Sage, Quickbooks and really like Xero
Make sure you have online access to Companies House and HMRC. It makes life a whole lot easier and it’s quite simple to sign up and use.
For the penultimate level:
You must demonstrate that as an organisation you make your staff aware of the financial aspects of your business including its financial performance and how their job/ responsibility impacts on that
Having regular meetings with management, where part of their job after the meeting is to disseminate information to their department or staff will help with this. Comprehensive contracts and job descriptions which detail key information and key communication will also help. You could use a workforce management program that allowed instant bulk emails to communicate information, to upload documents to act as references for management and staff In order to comply with the ultimate level
You must show that you have an “Open Book” approach with your clients/ customers in relation to your organisation’s finances. This is easier than you might think. These days if a customer wants an excellent level of service and he wants it long term, he or she is more likely to recognise that you are providing it. He will also be aware that you are both in business to make a profit. So he will be more open to discussions about charges and profit. In most instances gone are the days when you are just trying to pull a fast one on a client for a short term profit! However, make sure that when you do go open book, you include all aspects of a guard’s costs including wages, national insurance, uniform, travel and expenses, asset depreciation and any other variable costs together with a portion of fixed overheads.
First Part Conclusion
Initially, this can all seem quite onerous especially as small companies in the U.K are exempt from having to have a costly audit. Keeping good books and records is a mind set. You want to know where the money goes and how it is spent. What client, site or staff makes you the most profit?
Like employees good accountants, payroll clerks or auditors can be quite hard to find. If you have searched and found one make sure you take several references and see if you can get him to show you a list of customers and YOU pick the ones you want to contact. Realistically we can all give someone a list of 2 or 3 clients that love us! Its the one’s that we have had to work for that truly know our value! And it’s the same with security staff management programs. Pick one that delivers what you want or at the very least proves that they can deliver what their customers want. A system that has good customer support and you can speak to a real person. Your staff are the biggest cost and resource to most security companies. So you need a system that helps you monitor and manage them. You also want to pick one that will allow you to track your staff gross margin and manage your subcontractors! PARiM does all of this and more and is easy to set up and cost effective!
Jump to the Part 2!
You may also find useful the following blogs:
ACS Accreditation criteria #1 Strategy
ACS Accreditation criteria #2 Processes
ACS Accreditation criteria #3 Commercial Management