Strategic Financial Planning and Control:

Case Study of a Creative Communications Agency

M. Leong (MBA, CMgr, MCMI, ACCA), Financial Business Change Manager (KTP), University of
Wolverhampton
Wulfruna Street, Wolverhampton, WV1 1LY
+44(0)1902 321000, [email protected], www.wlv.ac.uk

Dr I. Mckeown, Senior Lecturer, University of Wolverhampton

Wulfruna Street, Wolverhampton, WV1 1LY
+44(0)1902 321000, [email protected], www.wlv.ac.uk

This case study examines Creative Communications Ltd (CCL); a creative communications agency in
Worcestershire. CCL is an SME with aspirations to overcome the perceived glass ceiling turnover of
1 million, particularly challenging in the recession in 2009/2010.
The objective is to explore the effectiveness of the Knowledge Transfer Partnership (KTP) programme
to help companies in the creative industry to make both the knowledge base and cultural transition to
improve competitiveness via strategic financial planning and control mechanisms whilst maintaining
the creative culture.

Key words: Strategic financial planning and control, Knowledge Transfer Partnership, KTP, Change,
Strategy

Abstract

Objectives:
This
case
study
examines
Creative
Communications Ltd (CCL); a creative
communications agency in Worcestershire.
CCL is an SME with aspirations to overcome
the perceived glass ceiling turnover of 1
million, particularly challenging in the
recession in 2009/2010.
The objective is to explore the effectiveness of
the Knowledge Transfer Partnership (KTP)
programme to help companies in the creative
industry to make both the knowledge base and
cultural transition to improve competitiveness
via strategic financial planning and control
mechanisms whilst maintaining the creative
culture.

Prior work:
The British Design Innovation Valuation
Survey (2008) indicated only 21% of
companies in the design industry have a
turnover exceeding 1 million. A study
conducted by NESTA in 2006 found only 35%
of SMEs in the creative industry use business
planning techniques. In order to grow, it is
proposed that creative businesses require
greater awareness of business strategy and
related core skills including financial planning.

strategic financial planning, allowing mitigation

against some of the impacts of the recession
by controlling costs without resorting to drastic
action which may have undermined the core
strengths of the company. The intervention of
this programme has enabled this shift in
understanding and application of new
knowledge.

Implications:
The KTP programme has proved invaluable as
a conduit to effect change at both the cultural
and financial management knowledge level.
An example include a move away from kneejerk responses to the challenging economic
conditions which could potentially result in staff
layoffs, partially attributable to a new
confidence in reliable and timely financial
information demonstrating the viability of the
business.
Value:
This is one of the practical methods of using
KTP to achieve the aim of companies via
effective strategic financial planning and
control but it should not be generalised. This
case study also sheds light that the
involvement of an external change agent,
willingness to change and knowledge transfer
are vital for continuous improvements.

Approach:
This currently ongoing case focuses on the
implementation of strategic financial planning
and control tools and practices, how this
change was introduced and assimilated into
existing practices and particularly the
knowledge transfer which occurred alongside.
The softer side involving the creative
characteristics
of
individuals,
the
organisational culture, change drivers and the
impacts of change are also considered.

Results:
The results to-date include embedded financial
controls - monthly management accounts,
profitability review of projects, systematic
budgeting and forecasting. This has facilitated
1

Creative Communications Ltd

Creative Communications Ltd (CCL) is a
creative communications agency based in
Worcestershire. CCL was established in 1988
by its journalistic entrepreneurs following the
spin-off of the internal communications
function of a major confectionery company.
With its experience of providing internal
communications services to its sole client,
CCL developed its capabilities and offerings to
include graphic design services. Hence, with
the combination of editorial and design teams,
the company has expanded its offerings in
both internal and external communications,
including producing brochures, branding,
packaging
and
campaigns.
CCL has experienced an organic growth. The
company grew from 2 to 12 people. The
confectionery company remained as the sole
client for the first 3 years and continued to
contribute up to 45% of sales after 10 years of
establishment. The expansion from a main
client to a portfolio of small, medium and large
clients was mainly attributable to referrals and
recommendations via the network of the
original client with minimal proactive new
business development strategy. The company
grew from a first year turnover of 124,000 to
1 million turnover in 2006. This was
sustained for the next 2 years. As an SME, the
companys aim is growth in order to sustain
and improve the turnover beyond the 1
million.

The business challenge is having the internal

capabilities to drive and manage growth
beyond the perceived glass ceiling turnover of
1 million coupled with the changes in the
creative communications industry, increased
competition and particularly challenging
recession in 2009/10. One of the key areas of
improvement identified is financial monitoring

and control to support strategic decision

making and planning.
Objectives:
This case study explores the effectiveness of
the Knowledge Transfer Partnership (KTP)
programme to help companies in the creative
industry to make both the knowledge base and
cultural transition to improve competitiveness
via strategic financial planning and control
mechanisms whilst maintaining the creative
culture.
The case study looks into the following:

Introduction of strategic financial

planning and control in a creative
company to compete more effectively

Demonstration of the effectiveness of

KTP in a creative company to achieve
its business goals

Contribution of the KTP experience

and approach in a creative company

Prior work:
The creative and cultural industries account for
7.3% of the economy, comparable in size to
the financial services industry. Many small and
medium-sized creative businesses have the
potential to grow, but struggle to do so, often
due to managerial shortcomings in the industry
(Department of Culture, Media and Sport
(DCMS), 2007). The British Design Innovation
Valuation Survey (2008) found only 21% of
companies in the design industry have a
turnover exceeding 1 million (Figure 1).
DCMS (2007) has also identified a number of
studies that suggested industries composed of
large number of small firms tend to suffer
disproportionately during economic downturns.
This fits into the profile of the creative industry.


Figure 1: Percentage of companies in turnover bracket in 2007-2008
(British Design Innovation Valuation Survey, 2008)

A study conducted by NESTA in 2006 found

that only 35% of small, medium enterprises
(SME) in the creative industry use formal
business planning techniques and a third of
the creative businesses with annual turnover
of more than 1 million have no explicit
financial goals. In order to grow, creative
businesses in the UK require greater
awareness of business strategy skills and
related core skills such as financial planning
(NESTA, 2006).

The KTP is a UK-wide programme enabling

businesses to improve their competitiveness,
productivity and performances. KTP enables
SMEs to access skills and expertise via
partnership with a knowledge base university
and a graduate as the project manager/
change driver. Based on the KTP annual
report 2008/09, the KTP programme has
benefited companies with an overall increase
in annual profit before tax of over 126 million
and approximately 6,500 business staff
trained. 75% of the KTP collaborates and
supports SMEs (Figure 2).

Micro
enterprises

Small
enterprises

Medium-sized
enterprises

Large
enterprises

(Fewer than 10
employees)

(10-49
employees)

(50-249
employees)

(250 or more
employees)

No. of KTP

82

355

284

243

964

% of KTP

9%

37%

29%

25%

100%

Company size

Total

Figure 2: KTP portfolio by size of enterprise (2008/09)

(KTP, 2009)

The number of companies involved the in the

KTP increased by 6% from 2003/04 to 964
companies in 2008/09. Companies in the
creative industry (combining Furniture, games,
jewellery; IT, multimedia; and Publishing,
media, sport industries) represented up to

15% of the KTP portfolio in 2003/04 solely by

the IT/multimedia industry. This maintained at
15% after 5 years but with less involvement of
IT/multimedia companies and a growth in the
other two industrial sectors (Figure 3a and 3b).

2003/2004:
Industrial sector
Aerospace
Agriculture, forestry, fishery

2008/09:
No. of
enterprise
9
19

Bricks, cement, glass

manufacture
Chemical manufacture

35

Construction

45

Education, administration
Energy, water
Finance

18
-

Food, drink, tobacco

59

Footwear, textile
manufacturing
Furniture, games, jewellery

21

Instrument, electrical
manufacture
IT, multimedia

115
136

Medical (including medical

device manufacturing)

Membership professional
organisations

Metal goods (including vehicle

manufacture)

130

manufacture
4% Chemical manufacture
5% Construction
- Education, administration
2% Energy, water
- Finance
7% Food, drink, tobacco
2% Footwear, textile
manufacturing
- Furniture, games, jewellery
13% Instrument, electrical
manufacture
15% IT, multimedia
- Medical (including medical

%
0%

13

1%

18

2%

29

3%

48

5%

35

4%

13

1%

<1%

22

2%

12

1%

37

4%

89

9%

81

8%

68

7%

- Membership professional
organisations
14% Metal goods (including vehicle

10

1%

56

6%

84

9%

36

4%

manufacture)
23

Plastics, paper, printing

industries
Publishing, media, sport

55

Service industry (including

distribution)

1% Aerospace
2% Agriculture, forestry, fishery
<1% Bricks, cement, glass

No. of
enterprise
0

device manufacturing)

Metal manufacture

R&D

% Industrial sector

102

Sustainability

Transport

Wood

Other

129

Total

903

3% Metal manufacture
6% Plastics, paper, printing
industries
- Publishing, media, sport
- R&D
11% Service industry (including
distribution)
- Sustainability
- Transport
- Wood
14% Other
100% Total

25

3%

38

4%

214

22%

17

2%

<1%

10

1%

0%

964

100%

Figure 3a: KTP portfolio by industrial sector 2003/04 (KTP, 2007)

Figure 3b: KTP portfolio by industrial sector 2008/09 (KTP, 2009)

On the other hand, finance function represents

less than 1% of the KTP portfolio (Figure 3b).
Business function
%
Business management

6%

Finance

<1%

Human resources

1%

Information and communications technology

9%

Logistics and distribution

<1%

Manufacturing process and operations

12%

Operations

8%

Product development and design

32%

Research and development

24%

Sales and marketing

6%

Supply chain

1%

Total

100%

Figure 4: KTP primary business functions 2008/09

(Source: KTP, 2009)

Approach:
Like many entrepreneurial companies, CCL
grew from the entrepreneurs journalistic
capabilities and developed the management
capabilities on-the-job. The core value of the
company is creativity with an open culture,
which coincides with the creative personnels
motivation to achieve their creative objectives.
The company has an aspiration for growth but
required further support and guidance on
strategy and management tools to crystallise
it.

Prior to the KTP, the company adopted

minimal financial planning and control. The
company utilised manual bookkeeping where
its bookkeeper only records Purchase and
Sales invoices details and engaged an
external accountant to prepare the year end
accounts. The accountant was not supportive
in establishing a more effective internal
financial system and hence, the control of the
financial information remained in the hands of
the accountant.

This financial system was used until year 2006

when the company had achieved sales of 1
million. In recognition of the growth in client
base and increased complexity of the
business, the company progressed to adopt a
computerised system, SAGE. With limited
resources and capabilities within an SME, the
financial information continued to be managed
by the bookkeeper with limited accounting
knowledge but progressively improved her
bookkeeping skills to utilise the computerised
system.

The financial information in SAGE was mainly

used to provide information for the external
accountants to prepare management accounts
and year end accounts. Due to cost
considerations, the management accounts
were prepared by the accountants only as and
when required in order to identify the
companys
financial
performance.
The
directors anticipated its general performance
based on sales and staff utilisation. The
companys financial monitoring and control is
very much focused on cash management
which involved monitoring bank balances and
control of debtors/creditors. Occasionally, the
2

directors looked into customer spend by

referring to the breakdowns of sales by
customers. An additional complication was the
fact that the directors and senior managers all
use Apple Mac computers which is not
supported by SAGE, making it difficult for them
to access relevant financial information held
on the system.

The company has developed its financial

system in response to the change in the
nature of the business. Due to the limited
financial capabilities in the company, there
remained a high reliance on the accountants
for the control of financial information. This
also undermined the confidence in the
accuracy and reliability of the internal financial
data as the discrepancies between the
accounts and SAGE was not fully rectified and
understood. For example, the bookkeeper was
repeating the mistake of classification of a
specific transaction which the accountants
were aware of but did not communicate to the
bookkeeper.
Hence,
good
accounting
practices were not actively encouraged in the
company which affected accuracy and
efficiency. Also, the year end accounts which
consisted of historical information have limited
use for the company to plan strategically for
the year itself. Hence, this led to the
requirement for management accounts which
consequentially
caused
increased
in
accounting costs as the company did not have
the capabilities to prepare them in-house. In
view of the costs considerations, management
accounts were only prepared periodically.
Moreover, the existing financial system which
focused on day-to-day cash management was
sufficient to facilitate management efficiency
but the lack of proactive financial planning is
inadequate to support the companys aim for
growth.

The company undertook the KTP in

recognition of the lack of understanding and
confidence to use financial information for
growth and the availability of resources and
financial expertise skills offered in the KTP to
help the company achieve its goals. In
addition, the company buy-in the concept of
knowledge transfer which would embed skills
in the company and also provide access to
academic support and resources.

With the relevant skills, the appointed KTP

Manager
introduced
strategic
financial
planning and control using the following
approach:

understanding
of
the
current
accounting
practices,
including
analysing
and
rectifying
the
differences between the accountants
records and the companys internal
records
introduced good accounting practices,
including monthly bank reconciliations,
proper and consistent classifications
of records and preparation of monthly
management accounts
introduced financial tools, including
profitability
review
of
projects,
budgeting and sales projection
introduced
monthly
financial
information
pack
with
financial
analysis,
including
management
account, variance analysis with
budget, prior year comparison and
financial ratios

The above change was introduced by working

very closely with the bookkeeper and securing
the support of the Managing Director. In
consideration of the limited accounting
knowledge of the bookkeeper, all new financial
practices were considered for relevance,
introduced and explained clearly in order to set
up good accounting practices with the aim to
reduce errors, increase efficiency and improve
learning.

This also involved working very closely with

the
Managing
Director,
especially
in
budgeting. Whilst the other financial planning
tools consist of historical data, budgeting is a
forward-looking financial projection of sales
and expenses and hence takes into
consideration of the strategy of the company
and its financial impacts. Scenario analysis is
also used in order to project different financial
performances.

The monthly financial information has also

subsequently facilitated the holding of monthly
Board meetings which previously had been
held on an ad-hoc basis and also encouraged
a more strategic approach to business
planning. This has also consequentially
developed into a strategic monitoring and
2

control practice to facilitate informed decision

makings on a timely basis.

As an external change driver, the KTP

Manager used a professional and systematic
approach with consideration of the core values
of the company in order to ensure that
involvements were encouraged. Progressive
knowledge transfer is also always encouraged
throughout the process, especially with the
bookkeeper who is responsible for the
maintenance of the financial information. The
open culture and willingness to improve were
very helpful to facilitate the introduction of a
good financial monitoring and control system.

Effective use of a KTP to help a

creative company to achieve its goals
The KTP provided financial and
expertise resources that the company
could not necessarily afford as an
SME. A KTP Manager is delegated
with the time and expertise to drive
and manage change which would
otherwise be challenging to introduce.
The intervention of this programme
which involved knowledge transfer has
also enabled a shift in understanding
and application of new knowledge in
the company.

Results:

Implications:

This is a currently ongoing case. The results

to-date includes:

The KTP programme has proved invaluable as

a conduit to effect change at both the cultural
and financial management knowledge level. In
complement to its strong cash management
which provided management efficiency, the
company has embraced a more proactive
strategy towards growth by leveraging on its
financial monitoring and control system. A new
balance of creativity and strategic financial
management has been introduced and
embedded in the company. There are greater
understanding, reliance and control on the
companys financial performance which
motivates greater confidence in informed
decision makings. Based on observation, there
is also greater awareness of the financial
impacts of the companys actions to the
business, not limited at the directors level but
throughout the company.

Embedded a financial monitoring and

control system in a creative company
This involved the establishment of
good accounting practices which
increased the confidence in the
accuracy and reliability of the financial
data. Additional use and value are
also gained from the accounting
system, SAGE. In addition to the cash
management, the directors are now
more empowered to use the timely
financial information to proactively
plan strategically and undertake the
necessary actions. This also involved
looking into achieving sales targets
leading to a more proactive business
development approach and managing
costs. Investment and financing
decisions could also be made more
confidently with the availability of this
system.
Having to weather the storm of the
recession, the companys strong cash
management is one of the key factors
which sustained the solvency of the
business. In addition, the new financial
system also enabled the directors to
undertake the necessary actions
confidently in order to mitigate against
some of the impacts of the recession
to ensure the sustainability of the
company without undermining the
core strengths of the company for long
term growth.

The next challenge for the company is to strike

a balance between creativity and financial
monitoring and control systems in order to
ensure that the company achieves the desired
business growth without undermining its
creativity goals.

Value:
This is one of the practical methods of using
KTP to achieve the aim of companies via
effective strategic financial planning and
control but it should not be generalised. It
provides a contribution of the considerations
and approach used within the KTP in order to
deliver the required change in the companys
3

financial system from cash management

approach to strategic financial management.
This case study also sheds light that the
involvement of an external change agent,
willingness to change and knowledge transfer
are vital for continuous improvements.

KTP (2009). Knowledge Transfer Partnership

Annual Report 2008/09. [Online]. Available
from
http://www.ktponline.org.uk/assets/Uploads/KT
PAnnualReport0809.pdf [Accessed on 28
April 2010].

References
NESTA (2006). Creating Growth: How the UK
can develop world class creative businesses.
[Online]. Available from
British Design Innovation Valuation Survey
(2008). The British Design Industry Valuation
Survey 2007 to 2008. [Online]. Available from
http://www.britishdesigninnovation.org/new/dd/
images/reports/31_BDI_Val_Survey.pdf
[Accessed on 28 April 2010].

Department of Culture, Media and Sport

(DCMS) (2007). Staying Ahead: The
Economic Performance of the UKs Creative
Industries. [Online]. Available from
http://webarchive.nationalarchives.gov.uk/+/htt
p://www.culture.gov.uk/reference_library/public
ations/3672.aspx [Accessed on 28 April 2010].

http://www.nesta.org.uk/library/documents/Cre
ating-Growth.pdf [Accessed on 28 April 2010].

KTP (2007). Knowledge Transfer Partnership

Annual Report 2006/07. [Online]. Available
from
http://www.ktponline.org.uk/assets/Uploads/20
0607AnnualReport.pdf. [Accessed on 23
September 2010].