When AISMA accountants Coveney Nicholls took over the taxation and financial affairs of a large London practice, they inherited a group of worried and financially stretched doctors who had lost all faith in their previous accountants.
The practice had a non 31st March year-end and, although their accounts reflected reserves for tax and superannuation, calculation errors by the previous accountants meant these had been substantially underestimated.
The practice had been advised that the partners could draw large sums out of the current accounts, only to find that their tax liabilities had not been adequately reserved for. Effectively, a whole year’s tax liabilities had been missed.
After 31st January, the date by which they had to pay their tax liabilities, the practice had disastrous cashflow problems, made worse by the overpayment made to a partner, based on the previous accountants’ figures, who was no longer at the practice.
Furthermore, no account had been taken of the requirement under the partnership agreement to retain a working capital sum per partner based on weekly sessions worked. All partners faced a reduction in drawings.
Sue Beaton, director, Coveney Nicholls says: “Our priority was to put a rescue plan in place as soon as possible so that the practice could regain a firm financial footing.” She describes how the Coveney Nicholls team set to work. “First we reviewed practice performance to assess what recommendations could be made to improve profitability and cash flow. Forthcoming tax liabilities were assessed and consideration given to changing the year-end in a year or so to bring the practice affairs up to date.”
All partners’ requirements were looked at individually and a recovery plan set up for each. Half-yearly management accounts will be prepared by Coveny Nicholls so that the practice can keep a close eye on progress. Sue Beaton concludes: “So far the practice is making good progress and is well on the way to achieving better financial control. We are in regular contact and are always on the end of the phone if needed.”
Practice: Large London practice with 8 partners
AISMA accountant: Coveney Nicholls
Theme: Reserves miscalculated by previous accountant
Detail: A whole year’s tax liabilities had been missed and the partners had overdrawn on their reserve accounts, severely impacting practice cash flow. Partners faced a reduction in drawings.
Action taken: Practice performance reviewed, recommendations made on improving profitability and cash flow, individual recovery plans made for all partners. Half yearly management accounts prepared to ensure progress is monitored closely.