Fractional Finance Director Newsletter – June 2025

“I’m playing all the right notes… but not necessarily in the right order.”

For me Eric Morecambe is one of the all time great comedians, and this line from the 1971 Christmas special one of his absolute classics.

Now you may well be wondering what this has to do with a Fractional Finance Director’s Newsletter. Fair question.

Well, I regularly arrive at new clients and think of this line, or at least a paraphrasing of it.

“We have all the right numbers…but not necessarily in the right month or the right place”

The business has a book keeper or maybe a Financial Controller, they have often been there some time and seen the business grow substantially.

They are doing a competent job, the bank rec is up to date, all the invoices have been posted, the debtors ledger is correct, the creditors ledger is right and so is the VAT.

All good then, well partially, the business will keep running, everyone will get paid and the cash can be chased.

Many businesses run like this for quite some time. The issue is that they don’t have any useful management information.

They will probably produce management accounts, these will often be straight from Xero or Sage. (Other accounting packages are available).

They won’t make any sense to the business owner, sales may be roughly right, but not always. The margin may well fluctuate wildly as will overheads. As a result the profit by month will yo-yo. Some months will be great, some really poor.

So instead of using the accounting information to make decisions, they will use personal estimates.

These will often have been reliable in the past, when the business was smaller and simpler, but this can be really dangerous.

I often think that running a business without reliable MI is a bit like flying blind, it will be ok, unless something happens, and in business something invariable happens. The loss of a key customer, a sudden price increase, President Trump or Liz Truss help out.

Then it is a real issue. I have seen this too many times.

The owner of the business is finally worried that he doesn’t know how the business is performing. He believes it is doing well or is nervous that it isn’t. Cash seems to be an issue but he doesn’t understand why.

I get involved and I find that lots of invoices are in the wrong codes, so it is hard to understand the margin or overheads and make decisions.

Also, there is no real attempt to match revenue and costs, no accruals where the goods haven’t been invoiced or deposits aren’t accounting for. So the margin fluctuates by month.

I resolve these issues, sometimes I use outside help if there is a large volume of invoices to be corrected. I finally produce some reliable management information.

Sadly, most of the time, the business isn’t doing as well as the owner believed and I have a difficult conversation. No one likes bad news.

But it is a crucial first step, once everyone can see that there is a problem the work can start.

Next, now that there is some reliable MI, I can help the business to get to the route cause, look at profitability by channel or product, review overheads, understand the product costs and then make suggestions for improvements.

With quality information the business can improve and with quality information the business will make less mistakes and the owner will always understand the financial performance.

No more “all the right notes… but not necessarily in the right order.”