MANAGING SENSE OF A COMBINED BUSINESS
A manufacturing and services company had been run for many years by two highly experienced engineers. Initially starting as a pure services company, they had developed a product range which they sold to external customers and also used within service projects that they undertook. They had a book-keeping function which met their legal requirements for VAT and annual accounts, and produced some basic monthly management accounts. What they really wanted to understand was “are both parts of the business profitable or not?”
We discussed whether to split the company into two separate legal entities and decided that this was not necessary, as well as potentially damaging to the business. We reviewed their current accounting processes and determined that some minor process changes were need to capture the information about products transferring between the two areas on a systematic basis. We produced a revised budget for the year and management accounts showing the performance of the two parts of the business separately, compared with budget, and with forecasts for the year. This at last gave the information they had wanted, in a way that integrated it into their regular accounting processes.
We are now providing a long-term interim FD resource to oversee the financial, budgeting and reporting processes and work with the Board on improvement projects.