Since becoming an interim FD in 2004, Mike Pawley has helped all kinds of businesses develop. We followed him to see if a part-time FD make a full-time difference.

Mike Pawley is living the dream – at least as far as some FDs are concerned. As a part-time FD, he dispenses his expertise at six different companies, often for no more than a few days a month.

An accountant for 20 years, Pawley had worked his way up to FD level and was looking for a change of scenery. He started working with FDUK, which places part-time FDs, in September 2004.

“I was looking for an opportunity to get out of full-time employment and part-time work seemed the way to go, to give me a bit more balance and flexibility, to work less and hopefully earn the same amount of money. So I set up on my own and after a certain amount of time I came across FDUK,” he says.

FDUK usually works with small, growing companies. The idea is that the FD’s work grows with them until they are ready to employ somebody full time. Today, Pawley is at Fit for Sport in Olympia, a company that organises children’s after-school sports clubs, coaching and holiday camps. Pawley originally came here in August 2006 to write a report on the business and now comes in on an on-demand basis one and a half days a month. Founded by entrepreneur Dean Horridge, the company, which has grown steadily over the past five years, had never had anybody within the business with any financial expertise. “They needed structure,” Pawley tells me.

“Fit for Sport had built up loads of really complicated spreadsheets, by which they ran the business, and they used their account system as a way of recording stuff. But they never actually used it to tell them what was going on,” Pawley explains.

“The company is run across several sites, but all the revenues used to go into one big lump and all the costs used to go into one big lump and then they’d write it all out on spreadsheets. A lot of businesses have a gut feeling about what’s going on and the accounts are just there because people have to do it. I told Dean that since we have to record this information so people can pay bills and pay us, why not use it to tell us how the business is running?”

Thursday, 1PM Pawley and Horridge sit down to discuss the structure of the company and discuss the terms they are hoping to agree with ex-footballer Ian Wright, who has been promoting sport coaching for unfit kids on behalf of the company. The next step is to set up a charitable foundation which will allow big companies to provide sponsorship to youngsters who can’t afford to go on courses.

These initiatives are coming through all the time – Horridge initially got involved with Channel 4 and Wright last year. That’s now grown into two initiatives – Fitter Kids and Fitter Schools. “All these things are putting challenges on the business the whole time. First, it’s about how to get the cash flow to get the ideas going, which puts big pressure on the cash flow for the business,” he says. “But launching something big and new needs an injection of capital. We use our cash flow forecast to work out when those are going to impact and when we’re going to get a return.”

But it’s obviously not as simple as just paying out. This is a small, private company that doesn’t have access to someone with a big chequebook. So a certain amount of head scratching has to take place. “We have looked at external bank finance, we’re considering external investment and trying to help the company work out what it needs,” Pawley says. “These guys keep coming up with things they want to do, so I need to prioritise them, work out how to do them and make sure they’re structured right from the beginning.”

2PM Pawley has found a few dubious charges on the professional fees schedule from the external accountant. The problem revolves around the type of accounts system that was originally set up, which is now revealing some shortcomings.

He has spent most of the morning with Horridge going through the bills and trying to iron out their response. Now he’s putting the finishing touches to a long email to try to resolve the situation. “That’s part of my job – to write in a language that the accountants understand. I can also be a little more detached. It takes a bit of the emotion out of it. Here’s the company’s case and now you’ve got to make your case.”

Another departure from “typical” FD work is the recruitment and business development work that Pawley does for FDUK, looking after the London and South Coast region. He explains: “I enjoy it because I’ve never done that before and I’ve never been in sales. I get paid on a success basis. It means my life is more varied than just doing accounts and finance. Accountants typically aren’t good salesmen.”

How else did his working life change? “It was a big transition from being paid each month and having people working for you and alongside you to suddenly working on your own – it wasn’t a natural transition,” he says. “Someone suggested it and I thought ‘at the right time, that sounds like fun’.” It seems like a good call.

3PM Pawley spends some time looking into a complex VAT issue affecting Fit for Sport. It has arisen because the company and its offshoots straddle three sectors – education, child care and sport. “Even HMRC finds it difficult to work out where our activities fall,” he says. “This is one of the areas I picked up on when I came in to write my report – we’re not quite sure about the VAT treatment of some of the things the company’s doing and we need to look at this. It’s going to cost a fair amount to get some specialist advice, but it is important from the company’s point of view that we get it right.” As he says, it’s not just about the protection of the company, but also its customers.

4PM Pawley takes another call from a client who wants to take a couple of hours to go through some issues. It’s a typical example of a client ringing up with queries that need to be dealt with quickly. “Today I’ve also had emails from three of my clients, that’s fairly typical. I take phone calls from them when I’m here, but they also call me when I’m with someone else. It’s part of the deal,” he says.

“Every day is different for me. If you work in one company, particularly if you do it year after year, it can get tired. By working in a portfolio of companies you are exposed to lots of different industries, sizes of business and personalities, and you have to juggle the demands they put upon you. I enjoy that – and it gives me more time to spend with my family. I can choose, if it’s a nice day, not to work. There are no fixed things in my diary – every month is a different shape.”

4.30PM Fit for Sport recently took on a book keeper two days a week to maintain the orderly structure Pawley put in place. The FD explains to her how Sage is set up and irons out a small anomaly in the month-end accounts, as part of the process of closing the January accounts. The year-end was in October so once she’s got things organised Pawley needs to pull out some of the information for a management meeting.

Pawley says: “With a seasonal business like this, you’re going to be in peaks of revenue and peaks of cost; the emphasis changes through the school terms and the peaks in the summer.” He explains that his job is all about working alongside the permanent team. “The operations director is now doing what he should be doing instead of the accounts. And Dean used to compile complicated spreadsheets. Now he can prioritise what he does best.”

With the last task of the day completed, Pawley’s heading home to Hampshire. Tomorrow’s another long day, so he needs to prepare for the next assignment. Southampton, here we come.

Friday, 12.45PM Today’s glamorous location is a leafy trading estate where Pawley has come to whip the accounts of LBhealthcare into shape. It’s looking like a routine day – there will be VAT issues to sort out, invoices to be dealt with and meetings to arrange, all within a framework of helping a small, but rapidly growing, company consolidate its finances.

LBhealthcare was founded three years ago by Lisa Brown to offer private medical care, including physiotherapy, hydrotherapy and MRI scans. The company is funded by a bank and a large group of external shareholders, including general practitioners and surgeons. The company moved into its shiny new premises 18 months ago. As we wander into LB’s offices, Pawley explains how he came to be involved with the company.

“They first approached me back in May 2006,” he says. “A solicitor that they were involved with put my name forward and I presented how FDUK could help them. I started working with them in June.” So what does he bring to this business? “My role here is quite diverse – we have a monthly board meeting at which my primary role is to present the monthly accounts. We also send out accounts quarterly to our shareholders.”

1PM Pawley settles down in his office. He’s looking over some notes from the previous evening’s board meeting, at which they reviewed some changes to the shareholders agreement, which was put in place three years ago. “We ended up with a very complicated document, which makes it difficult to run the company three years on,” he says.

“Some of the protection that is in there for shareholders is a bit over the top and out of date now. So we have had some lawyers working with us to make it more relevant to the company. We need to have an annual general meeting in the next few months to seek the shareholders’ approval to make those changes. Our lawyer has been on the board heading up that process.”

It’s a busy time. The next year-end is looming at the end of the month. Because the board members all have day jobs, the meetings can’t kick off until the evening. They finished quite early last night, around 10.30pm – a more usual time would
be midnight.

2PM The FD needs to grapple with a VAT issue that has arisen from an upturn in the company’s fortunes. LBhealthcare was doing monthly VAT but it has gone quarterly, because it’s paying more VAT than it’s claiming. But now the company has a monthly return that covers the same period as a quarterly return and the VAT office’s computer can’t handle it. They won’t pay the money due until LBhealthcare pays the ‘outstanding’ amount from last year.

Pawley explains that the company’s VAT classification is causing some of the problem. “Healthcare is generally exempt from VAT. That doesn’t mean you charge 0 per cent but just that it isn’t relevant. It does mean that you can’t claim any of your input back,” he says. “If you’re charging 0 per cent you’re allowed to, but it’s a fine technicality – all our physio is exempt, for example, but some of the other things we do
have a standard rating.”

How does this affect the finances? “When we built the building we incurred a lot on the building costs. This was initially claimed back as a percentage of the VAT, so now, for the next ten years, we have to recalculate the ratio of our taxable outputs and our exempt outputs, and we have to keep adjusting the amount of VAT we pay on the building. If you’re fully taxable, you claim all the VAT you spend on the building and that’s it.”

Pawley’s pleasantly surprised at the level of help the VAT helpline provides, and five minutes later the little wrangle is sorted out. He puts the hefty VAT folder on one side. These are just copies of the returns. All the filing is now done online, which helps with the cash flow for a small company.

The internet is very handy in Pawley’s line of work. “Having the internet has been so useful because it makes it a lot easier to track things down. One thing that can be tricky is remembering who can do what and who knows what at the various companies I work at. I have an email address with every company that I work with – if I can ever remember any of them.”

3PM Pawley heads upstairs with some queries about the invoices for last month with Lynn Hart, the office manager. As Pawley is part-time, often there’s no-one around to ask if there’s a query on the accounts. “I had a look at our invoice and our charging report for January and I’m just trying to see why those two things don’t agree. What it’s brought out is that there are a few admin procedures where there’s been income that we hadn’t invoiced at the end of January – and a simple report would have thrown that up,” he says.

“We’ve now found a way to make sure that won’t happen again. It won’t stop people backdating things by accident but we’ll be able to pick them up. Sometimes there’s no-one to ask at the time – and you have to allow people their initiative.”

The major restructuring the NHS is going through at the moment is making sorting out the finances in this area a little tricky. “We bill the Primary Care Trust at the end of the month and will renegotiate the contract in April. We’ve got two physios who do nothing but NHS work and if we lose that contract, which in theory we might, that makes it more difficult to suddenly generate private work,” Pawley explains.

However, the NHS’s loss is LBhealthcare’s financial gain: because the NHS has to outsource a certain percentage of its work, there are lots of companies like LB springing up. It started off offering purely physio but recognised that because the NHS is changing there are more things the company can take on.

Pawley says: “We are even thinking about going into botox and things like that – if there’s demand for it.” So get down to Southampton if you’re in the market for a wrinkle-free brow. “If there’s someone waiting for a endoscopy or whatever, we say ‘yep, we’ll do that’, and then we charge them – in effect, the NHS PCT gives us its waiting list and says it wants it done by a certain time. We then have a contract with surgeons and hire a operating theatre and the PCT can say ‘we’ve got rid of that’.” All good for the PCT’s targets and LB’s accounts.

4PM Pawley pops outside to organise the dates for the upcoming AGM – the year-end is very near the end of the tax year and the increasing number of revenue streams have upped the pressure of keeping the operation streamlined.

As he says: “It’s a bit of a mix.” A main source of income is the MRI scanner that LBhealthcare brings in twice a month for GPs and physiotherapists to refer patients to. It also runs a number of outside services, including physiotherapy surgeries and NHS physiotherapy for the elite athletes at Southampton University, Hampshire Fire Brigade and the Hampshire Constabulary.

He says: “We’re always starting new revenue streams, so I’m looking at the VAT on things and what costs we’re going to incur. This one is a really good opportunity for us and it’s a good name to be partnering with.”

As the company grows, Pawley is aware of the need for outside help. After all he’s an all-round FD, but even he struggles with the minutiae of the tax code. “We never try to replace the external advisers, all we try to do is give smaller companies similar expertise as the bigger players, but without the costs,” he says. “Smaller companies need good advice and experts, just not five days a week.” Pawley gets his papers together for an early Friday afternoon finish. It seems like the FD is having a good time while he’s levelling that playing field.

Related tags: fit for sport, lbhealthcare, part-time fd, mike pawley, fduk,