Like others in the profession I try to drum into my clients that they should practice good housekeeping in their businesses, remember that their company's money is not their own and to ask me before doing anything out of the ordinary. This is the time of year when we tend to find that some clients have ignored our advice and painted themselves into a corner from which even I with my skills and long experience have difficulty getting them out in a painless fashion. There are some golden rules in running a company and I am not normally into quoting Government ministers, but this is what Margaret Hodge recommended in 2007 when at the DTI:
1) Act in the company's best interests, taking everything you think relevant into account
2) Obey the company’s constitution and decisions taken under it
3) Be honest, and remember that the company's property belongs to it and not to you or to its shareholders
4) Be diligent, careful and well informed about the company's affairs. If you have any special skills or experience, use them
5) Make sure the company keeps records of your decisions
6) Remember that you remain responsible for the work you give to others.
7) Avoid situations where your interests conflict with those of the company. When in doubt disclose potential conflicts quickly
8) Seek external advice where necessary, particularly if the company is in financial difficulty.
All this is pretty important – keeping the company's money away from the owners' own money, minuting all payments to directors and all dividends to shareholders, and avoiding conflicts with personal finances. Obvious stuff and I even send the above list to new owners of companies.
The other golden rule is asking their tax adviser before doing anything they haven't done before. I really could scream sometimes because often even after we get a client's books and records in it is only with close questioning that we can get to the bottom of what they have done. This is not because they are dishonest but because they are suddenly too embarrassed to tell us what they have done as they know we will not be pleased. It is like dealing with naughty children and we just have to be patient, but why do we have to find out when up against deadlines? It's no wonder I'm getting thin on top but I always present a calm demeanour and will never tell a client off except in the most polite terms.
The real point of this piece is not to have a moan, but to emphasise the importance of good record keeping, good planning and asking advice before doing anything out of the ordinary. Even for small companies and businesses good corporate governance is essential. It is only common sense after all!