My trip, a dinner with my ex-Ernst & Young colleagues, met with an inauspicious start.  As I emerged from London Bridge Tube Station I bumped (literally) into a ’top London attraction’ rep physically fighting with one of their competitor’s reps.  Given their respective statures it was like a scene from Laurel and Hardy!  This was a unedifying encounter, and reflected very poorly on their respective company’s brand (especially as both had the company logo on their chests) and it left me wondering what their employer’s would have thought?

Fortunately dinner with my friends was far more amiable but I was shocked to learn that after 20 year’s of dedicated service they received nothing, not even a thank you email from their employer.  Is there not a direct correlation between employee loyalty and business profitability and success?  Much is done to retain customer loyalty and the cost of selling to a customer versus the cost of winning a new customer is well understood, but do the same principles not apply to employees?  Don’t get me wrong, they weren’t complaining, and weren’t expecting any recognition.  Clearly this is the way big firms run, but I couldn’t  help but feel a little sorry on their behalf that their loyalty wasn’t recognised.

Mike O’Connell, CEO, Isosceles Finance

Jeremy Thomas, Renewable Consulting Practice, Isosceles

The EU plans to improve its energy efficiency by more than 20% by 2020. In other words, 20% less energy will be used by then, according to the plans determined by the EU. If we look at the baseline in 2010 the primary energy consumption of the EU was 1772 Mtoe. So by 2020 we can expect this figure to go down to 1416 Mtoe. Substantial steps have been taken towards this objective – notably in the appliances and buildings markets. Nonetheless, recent Commission estimates suggest that the EU is on course to achieve only half of the 20% objective unless it takes action in other areas. Meanwhile the USA has the potential to reduce annual energy consumption by approx 22 percent by 2020, eliminating more than $1.0 trillion in costs.

Whether or not the plans are achieved, the cheapest form of energy will probably be energy efficiency for some time yet.

Jeremy Thomas, Renewable Consulting Practice, Isosceles

Following the announcement last year of drastic reductions in the solar Feed-in-Tariffs (intended to be implemented by 12^th  December 2011) a successful legal challenge was mounted against the DECC – the court ruling branded its plans to rush through cuts to solar feed-in tariffs as unlawful. So DECC in-turn have mounted their own appeal against this legal challenge.

The future direction of the UK solar industry is potentially on hold as the court hearing takes place, it is impossible to predict the outcome of the hearing and it is uncertain as to how long the legal battle will continue thereafter.  Our analysis of the situation is that:-

• DECC  is likely to enact a consultation period regardless of the legal battle, this consultation period will not give enough time to most installers to construct and operate new projects
• The proposed tariffs will drastically reduce the level of new installations, some players may be able to install <4kW at the confirmed tariff of 21 pence per kWh until April, but with multi-site discounts and EPC category C requirements, other projects will struggle to make an economic return at current capex levels
• The cost and complexity of then appealing the Friday 13^th decision if DECC are successful is substantial, allied to the costs is the feeling of a sense of futility in pursuing it any further, as it seems increasingly inevitable that the tariffs will be reduced as proposed

We believe Solar is an attractive form of distributed generation which is visually unobtrusive, has low environmental impact and a minimal carbon footprint, it is reasonable to assume given falling capex prices, that Solar power could have potentially reached near to “grid parity” in some areas of the UK within a couple of years. Meaning that solar could have become cheaper than many other renewable sources after taking into account distribution costs, retailing costs and energy price inflation.

The Feed-in-Tariffs did require a reduction as the initial tariffs had become too high, but the new tariff levels proposed essentially “kill-off” a nascent industry that was growing and employed a large number of people and contributed to the exchequer through tax receipts and skilled employment. We hope that DECC reconsiders the future tariff levels to encourage schools, local authorities and other bona-fide users of locally produced energy that can allow the more efficient industry players to continue to prosper without large scale job.

Jeremy Thomas, Renewable Consulting Practice, Isosceles

P.S.  Decision delayed for at least a week – solar industry remains in limbo

Mike O’Connell, CEO, Isosceles Finance

The investor is in fact a Chinese province and the investment was negotiated by the province’s very entrepreneurial Mayor (do the words Mayor and entrepeneur usually go together?).  This Chinese province is looking to acquire and control the intellectual property, move our client’s manufacturing to China and provide gainful long term employment to the workers within the province.

It is truly a sign of the times when a growing UK technology company is unable to find funding in Europe or America!   Sadly in this situation the IP, the jobs and the future profits are all going to China.  I suspect we will be reading a lot more about inventive funding in the decade to come.

Any MBA or business studies course will point out the importance of having a properly controlled and well disciplined accounting function. There have been many catalogued disasters where lack of this vital process has resulted in the ultimate demise of the largest of organisations let alone the new start-up.

But who is this colossus, on whose shoulders can be borne the weight of investors’ trust, with responsibility for accounting for the Sales Director’s complex deal, whilst massaging the CEO’s ego? Interestingly, apart from the odd Monty Python-like parody little time has been spent analysing what sort of person wants to become an FD and what makes a good one.  The starting point is to understand the origins of the typical FD.  80% of graduate Chartered Accountants come from a mathematical, accounting or scientific background - people who like definite answers to a problem. Many of these individuals ‘fell’ into accounting unable to decide what to do in life.  Accounting offered a safe option, good pay, good prospects, something one could succeed at, but still a qualification with so many options open. Our budding FD still didn’t need to decide what they really wanted to be when they grew up!

The best FDs I have met combine two other significant qualities. Firstly, they have the ability to picture the story behind the numbers, their favourite word is ‘because’. After every accounting fact the FD relays comes a ‘because’ statement. The second quality is the ability to communicate this picture in a way that everyone in an organisation can easily understand. An FD that resorts to complex jargon to explain a company’s performance doesn’t understand what is actually going on behind the numbers.

But surely these are the skills we associate more readily with a salesman or a marketeer. So are we looking at a problem solving, risk-averse salesman that does not quite know where they want to end up in life?  Well yes, and I believe this is why so many FDs make the transition from FD to CEO. In fact more than one in five FTSE 100 CEOs are accountants.  This may also explain why in SME companies so many FDs feel unfulfilled or worse, live in conflict with the rest of the management team.

This is often a more acute issue in Venture Capital (VC) backed companies. The VC, quite rightly, wants a solid controller of funds and someone with experience to manage the company’s finances from small to medium to large to exit.   However, the problems come in the length of time it may take for a company to become successful.

When spectacular growth occurs, no problem, but what if the market or product is not quite ready and there is a delay in execution? After a while our FD starts to become a little bored and in a vain effort to add value starts to become the salesperson or marketeer that they really wanted to be all along.  When these efforts fail, the FD becomes de-motivated and can no longer implement the strict financial and budgetary measures necessary in the same cheery and light-hearted way they once did. In short the FD gets in the way.

At Isosceles we have seen this issue on a regular basis.

Rarely is the person who is going to take the company public, deal with corporate financiers, investors and NOMADS, the same type of person who is going to produce management accounts, the forecast and weekly cash-flow when the budget doesn’t run to a financial controller as well.

We have had clients who have had as many as four full-time FDs in two years.  That’s four sets of recruitment fees, and four handovers.

This situation partly explains the rapid growth in  part time FD and outsourced FD services such as those Isosceles provides. The part time FD services have prospered not only because the client gets access to the higher FD skills they need in a cost effective way, but because the concept of running a portfolio of clients where the financial processing and controller elements are covered within one team has attracted excellent FDs.

So what is the solution when the FD does get in the way? Well, half an FD of course!

Mike O’Connell, CEO, Isosceles Finance

Independently those members of Isosceles personnel who are working on Sheffield related activities have all commented on how polite the people of Sheffield are. A recent email campaign resulted in an unprecedented number of replies – not necessarily positive, but replies nonetheless.   Similar campaigns ‘down South’ are at best ignored and at worst receive a verbal rebuke.

I am so glad we chose Sheffield for a second office.

Mike O’Connnell, CEO, Isosceles Finance

If you relate to one of the following, now would be the right time to outsource part or all of your finance and accounting function:

•  Rapidly growing or contracting businesses (quite often wanting to vary the costs of finance and accounting)
• You want a smaller highly focussed team concentrating 100% on developing great products and services and delivering these profitably – all the other clutter of business you want someone else to take care of.
• The business cannot afford a full-time Finance Director so the CEO is trying (and often failing) to fulfil this role – whilst also trying to grow the business
• Lack of, or poor quality, management finance and accounting information
• Experiencing high rates of staff turnover or skills shortage
• The business needs to generate operational efficiencies

Incidentally outsourcing doesn’t require firing existing staff and starting again, or binning the in-house finance systems.  At Isosceles we provide our service at our site or yours, on our web-based systems or yours, using your personnel and/or ours.  We also deliver a service tailored to each clients individual requirements – this is not a ‘one service fits all’.

Dave Eaton, Manager Sheffield Office, with Claire and Aiysha

I am delighted that we have opened our second office, in the very welcoming city of Sheffield.

We have successfully supported over 100 ambitious companies from our South West London Head Office but we are now ready to implement the next stage of our growth strategy.

I haven’t used the term ‘welcoming’ lightly in my opening statement.  I cannot thank Ann Allen and her team at CreativeSheffield enough for their welcome, guidance and the quality of their city briefing and information pack.  They were without doubt instrumental in our choice of Sheffield.

If  you are not familiar with CreativeSheffield, they are the city’s economic development function, funded by Sheffield City Council with business growth its core activity.  Between 2008 and 2011, CreativeSheffield leveraged over £75 million of private sector investment and assisted in the creation and safeguarding of 5,000 jobs.  Not bad eh?