Bookkeeping: A Classic Mistake

I visited a care business today.  They supply domiciliary care services to elderly people, supporting them to live in their own homes.  The business is about 2 years old and expanding rapidly on the back of mainly low-margin business offered through social services.

They have made a classic bookkeeping mistake that I have seen several times before.  In fact, in one of my previous businesses I also had this problem.  They have a complex accounting package purchased from the industry leader.  The problem is that noone in the business knows how to operate the software correctly.

They employ a part-time bookkeeper who is approximately 5 months behind on data input and only has a basic knowledge of the software.  This renders their investment in bookkeeping completely useless because they are getting no reliable management information with which to run the business.

As a result of the expanding turnover, the fact that wages are paid weekly and they sometimes don’t get paid by social services for 3 months, their cash flow is tight.  (I was told that according to their accounts they had £500,000 in the bank!)

Without accurate and up-to-date management information, they cannot approach the bank manager for help (assuming they merit it).

I advised them that they must take radical and decisive action to rectify this situation.  They must either commit to their accounting software by employing a competant bookkeeper, outsource the job, or ditch the current software and use some basic bookkeeping software that can be mastered within about 90 minutes.

This would give them all the information they need at present without the expense and complexity of their current accounting package which is powerful enough to run a PLC and is quite inappropriate for their size of business bearing in mind that they don’t have the accounting skills to use most of the features.

This is a classic case of misselling and the very survival of the business (and 55 jobs) is at stake.

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