In this article we interview James Watson, co-Founder & CEO of Pennybooks about his background and experience as an accountant.
Why did you want to become an accountant?
Accounting seemed like a good profession which kept doors open and gave a few options going forward.
How have the technological advances in accounts and software impacted businesses?
It has had a significant impact. Most of our clients are small start-ups, and them being able to use cloud account products that give them real-time access to their finances is amazing.
Ten years ago, only big companies would be doing this. Small businesses would have been much more backwards-looking. Now, a small company can put together a business plan and track actions against that plan monthly. It gives them real-time access to much better information, and they can make informed decisions and plan their cash flow better. I think it's only positive.
How common is it for businesses to overpay or underpay tax obligations?
From what we see, it's probably more common that businesses underpay. The main reason they underpay is bad data leading to inconsistencies and incorrect tax returns being done. For example, not VAT registering once they reached the threshold and being late on that. Also, having not paid VAT when they should have done. We get some clients who just haven't submitted their annual accounts for a company because they believe they are too small and haven’t realised they need to do so.
What do you think are the most common mistakes that small businesses make?
From my view not putting enough time into a business plan and not planning well enough. You don’t have to prepare, update or overly complicate a business plan but, everyone should have something simple that maps out the next 3, 6, and 12 months. Generally, we see that where this is not done well enough, you end up with cash flow issues. The biggest issue for small businesses is that they get their cash flow wrong. For example, recruit many people, sales don't come in as expected, and they have liquidity issues.
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What was your most memorable audit experience?
This is a tricky one because audit is so boring but something that stood out is going to a stock count, which is always the worst thing you have to do when you're an auditor and being driven around in a car counting other cars. I did that for the whole morning, which was a very odd experience. Otherwise, there isn’t that much exciting that happens in audit.
How was Pennybooks founded?
I met my business partner while we were both finance directors working at different companies and in different industries. We were growing tired of working in big corporate companies and wanted to do our own thing.
We thought there was a gap in the market for no-nonsense, no-frills, done-on-time accounting product for small businesses. We wanted to create something that appealed to startups and just tried to make it fun and an enjoyable process from the beginning.
How does your current role as a founder differ from when you were an employee?
It's pretty different. You don't have a boss to start with or a nice paycheck and there is pros and cons to that. Ultimately, me and my co-founder are responsible for the direction of the business and where it’s going. You lose that safety net, but the benefits that brings outweigh the cons. It’s exciting, but at the same time it can be stressful.
What is the best tip that you can give to early entrepreneurs having been on a journey yourself?
Don’t be afraid to make mistakes but also try and learn from your mistakes pretty quickly. What we've found, especially at the beginning, is that you're in a series of constant adjustments, you do something, you work out that you're not doing it the best way, you change it. Or you do something and you work out it’s completely wrong (hopefully pretty quickly).
What you don't want to do is just chug along, doing something that's not right for months because you are going to lose a lot of time. You've got to look in the mirror quite a bit and just be brutally honest with yourself about whether you're doing the right thing or not, that's what we found.
What was your biggest kind of career lesson?
I'd say probably starting Pennybooks. It has opened me up to having to do all these other things that I’ve never done before. Sales, marketing, growing teams and managing all that. There's just all these other things that in my old accounting and finance roles I didn't see much of, which is great because it's exciting and you get to do all the things that you didn't have the opportunity to do before. I think the whole thing process of starting a small business is probably the biggest lesson.
What is your favourite book and why?
My favourite book is one I have read quite recently, Shoedog by Phil Knight. A) because he’s an accountant and B) it’s a nice story of how Nike was founded. At the beginning, they were this scrappy startup and it's quite an amazing tale of how they kept their values through their growth. It's an inspiring story, he sounds like an interesting guy and they had a nice work environment.
Is there anything that you would apply to Pennybooks from the book?
To not take yourself too seriously, to have a good work environment and ensure that everyone respects that.