Sunday, September 28, 2008

The Dragons' FD

TMP offers a further idea for stimulating new company start ups. There’s obviously been a huge amount of interest in Dragon’s Den and The Apprentice, suggesting that many people are aching to cut loose from the shackles of secure employment to try their luck at business start-ups.

Some of those on Dragon’s Den who are naive enough to bowl up and ask for money to pay their own wages fairly rapidly learn the first lesson of investment reality – you start by investing in yourself. So there is a need for busy investors to keep tabs on these fledglings, to ensure that they are on the right tracks. Investors really don’t need interminable meetings and discussions, they just want to be able to set out and agree basic game plans, and then monitor for exceptions.

For many start ups, the last thing they need is to hire a full time financial director to count the beans and produce management reports. A rather more useful way forward would be the adoption of an entirely online business accounting process that was rigidly adopted from day one, where an investor can log in at any time to get a snapshot of what the business is doing with their cash. It is amazing how few such systems are available, and how convoluted the accounting procedures of most small businesses remain, mostly for the benefit of the High Priests of the black arts of finance, their accountants.

Such an option for totally transparent accounting practices would allow investors of all sorts – possibly including suppliers to start ups in some circumstances – to become de-facto share holders in those businesses that took their fancy as potential growth partners.

In one fell swoop, such a scheme could help addresses the perennial moan that small, businesses rarely provide adequate accounting and business information to their bank managers and investors, and find it difficult to establish credit facilities with key suppliers.

No comments: