The Challenge
A large IT company in the UK was facing mounting operational and compliance challenges
that were directly eroding profitability and creating cash flow stress:
- Project Costing: Costs were allocated inconsistently, making it impossible to measure project-level profitability.
- Payroll Management: Payroll inaccuracies and inefficient processes undermined staff satisfaction and created compliance risks.
- Overhead Absorption: Overheads were not allocated properly, inflating taxable income and misrepresenting margins.
- SaaS Invoicing & Receivables: The billing system was fragmented, leading to late invoicing, poor receivables control, and weak liquidity.
- VAT & PAYE Arrears: The company had fallen behind on VAT and PAYE payments, facing penalties, interest, and regulatory pressure.
- Corporate Tax Burden: Incomplete expense capture and poor structuring resulted in a higher-than-necessary corporate tax liability.
Our Solution
1Financial delivered a comprehensive turnaround plan:
- Project Costing & Profitability Analysis: Implemented a structured costing system, linking direct and indirect costs to projects for accurate margin reporting.
- Payroll Overhaul: Designed an integrated payroll process, ensuring accuracy, timeliness, and compliance with employment laws.
- Overhead Absorption Model: Developed cost allocation methodologies to reduce overstatement of taxable income while presenting true project margins.
- Receivables & SaaS Billing: Standardised invoicing and automated SaaS billing, integrated with accounting to accelerate revenue recognition and strengthen receivables management.
- Negotiations with HMRC: Engaged directly with HMRC, negotiated structured payment plans for both VAT and PAYE arrears, and successfully reduced immediate cash flow pressures.
- Corporate Tax Efficiency: Reviewed the tax position, identified unclaimed deductions, and built a forward tax strategy to lower recurring liabilities.
The Outcome
- Profitability Restored: Accurate costing and overhead absorption allowed leadership to see true project-level performance, improving bidding discipline and profitability.
- Improved Cash Flow: With receivables under control and HMRC payment plans in place, liquidity stabilised and the company regained breathing space.
- Payroll Confidence: Employees were paid accurately and on time, restoring trust.
- Compliance Normalised: VAT, PAYE, and corporate tax obligations were brought back under control, removing the risk of penalties and reputational damage.
- Future-Proofed Finance Function: By integrating FP&A with accounting, the company moved from reactive firefighting to proactive, forward-looking financial management.
