For over 20 years we have engaged the services of Parfrey Murphy (Chartered Accountants) to act as the external payroll provider to our Irish (HQ) operation…. In that period I can attest to Carbery having received an excellent service…. We have no hesitation in recommending Parfrey Murphy as payroll service providers.Colm Leen
Since 2006 we have outsourced our entire accounting function for our 3 locations in Ireland to Parfrey Murphy….We are delighted that we selected PM to carry out the above work…. They are extremely professional…. I would, without hesitation, recommend Parfrey Murphy to any potential outsourcing client.Jackie Gorman
We would like to thank Parfrey Murphy for providing us with invaluable information and assistance in the organisation of our tax returns…Dermot Harrington
I first engaged Parfrey Murphy as my accountants in 2008. This has proven to be extremely helpful to my business. From carrying out my annual accounts and a number of other services during the year they have been both proficient and professional at all timesAndrew Mackin
Business and Compliance Risks
It is not possible to eliminate risk entirely when running a business. However, where the risks faced by a business can be identified, the owner and managers can take steps to manage or reduce the risks to an acceptable level whilst been aware of the impact on return.
Outlined below are some of the risks that a business can face from time to time.
Owners aims and requirements
1. Returns from the business
The owners’ lifestyle and financial obligations could lead to excessive amounts been taken from the business which could threaten the ongoing existence of the business.
2. Exit risk
The exit route needs to be planned to avoid the risk that the owner is unable to obtain suitable return and is ‘trapped’ in the business.
3. Control risks
The owner, where involved in management, may have too much, not enough, inaccurate or late information. This risks inappropriate decisions being made which impacts on the continued running of the business.
Objectives of the directors/senior managers
1. Conflict over direction of business
Conflict between owners and managers will generally be a drain on the resources of the business and will lead to disenchantment on both sides with neither party reaching their objectives.
2. Loss of directors/senior managers
It is difficult to find strong directors and retention is a key issue. Loss of strong directors will have a detrimental impact on business performance and as such the level of returns to the owners.
1. Loss of key staff
Loss or failure to recruit staff with specific skills can result in the business being unable to meet commitments or having to pass up work. This will obviously impact on results but could have longer term effects if the business is seen as being unable to provide the required level of service.
2. Regulatory breaches
There are a wide variety of regulations dealing with employee protection issues. Breaches of regulations may have financial implications.
Unusual or unique labour practices
1. Additional tax liabilities
The taxation system is not operated correctly or is applied incorrectly to certain staff resulting in additional liabilities for the business as well as additional management time commitments.
1. Poor quality goods
Goods of poor quality received leading to lost sales or reduced margin and increases in the level of stock held.
2. Uncompetitive pricing
Prices charged for goods are not competitive resulting in reduced margins.
3. Loss of supplier or stock
A key supplier goes out of business or is unable to supply the required item of stock. This may lead to the business being unable to satisfy its orders and result in ongoing loss of business.
1. Loss of key customer
A key customer is lost resulting in turnover falling with no reduction of fixed costs leading to reduced profits.
2. Insufficient profit from customers
The size of the customer may result in additional resources being applied which exceed the profit being generated or small customers in overall terms may not generate a profit after taking into account administrative and other costs.
1. Long leases
The business is committed to long lease of premises that are not suitable for its future requirements.
2. Under insurance
The business is underinsured in respect of the destruction of buildings and fails as a result.
1. Non compliance
The business fails to comply with the rules of its regulator either in terms of systems or the filing of reports and incurs significant penalties.
1. Old products
The business is selling out of date products and is generating a lower margin and is unable to finance or source new products.
1. Low quality products
The business’s products are of low quality or are unable to compete in terms of price.
Structure of the entity
1. Inappropriate structure
The structure is inappropriate exposing owners to excessive liabilities or creating difficulties for the owners in extracting value from the business.
2. Disagreement between owners
There is disagreement between owners either on the running of the business or in other areas and this creates difficulties in managing the business.
1. Directors’ personal liability
A poor financing structure can make it difficult to finance expansion and can expose directors to liability via personal guarantees.
Too much responsibility rests with one person and poor decisions are made and frustration sets in. The performance of the business suffers as a result.
Composition and operation of the board
1. Legal obligations
Directors are unaware of their responsibilities to the company and their obligations under law and act inappropriately or unlawfully.
1. Staff retention
A key manager leaves the organisation resulting in loss of knowledge and potentially the loss of other staff and customers.
1. New legislation
New legislation increases business costs.
The business is unable to deal with regulations leading to either regulatory action or action by dissatisfied employees.
3. Government policy affects the market
Government policy affects the market for the product possibly leading to lower margins and sales.
1. Financial exposure
The business suffers a significant exchange loss on assets or liabilities denominated in foreign currencies.
General economic activity
1. Economic climate
The business is affected by the general economic climate and is for example under or over stocked.
1. Competitor advantage
Action taken by competitors gives them an advantage over the business in the market place.
Seasonal and cyclical activity
1. Lack of information
Business decisions are taken without awareness of the impact of seasonal or cyclical factors resulting in lack of profitability and potential cash flow problems.
The market place
1. Market changes
The business fails to respond to changes in market conditions and market share is lost or margins impaired.
1. The use of unauthorised software
This exposes the business to risks that the unauthorised software will corrupt key parts of the system and to potential charges for copyright theft where unlicensed software is used. Not only can this result in significant costs but the damage to the company’s reputation can be severe.
2. Loss of data
Computers, as any other equipment, can fail. This can lead to loss of data. Data can also be lost in other circumstances such as fire or theft.
3. Virus attack
An undetected virus can create havoc with a system and destroy vital data.
4. Application errors
In some cases key business decisions will be based on information obtained in an application such as a spreadsheet. This spreadsheet may have been created some time ago and undergone a number of subsequent changes.
This can result in errors that lead to inappropriate decisions being made.
Accounting systems and internal controls
1. Statutory records
The business must maintain minimal records to comply with the Companies Acts and avoid legal penalties.
2. Accurate information
The accounting system must provide timely, relevant and reliable information for the decision makers.
3. Inadequate controls
Cost effective controls must be in place to highlight errors and prevent fraud.
Related Article: Top 10 Reasons Small Businesses Fail
Please call Noel Murphy today on 021-4310266 if you need further information on business and compliance risks or a free consultation.