The Caatalyst

When the entrepreneurial bug bit Charlie Watson, he ventured into the profit recovery business. John Prosser meets...

Some of Charlie Watson's corporate clients thought it was just too good to be true. Surely there had to be some sort of catch? But when your business is retrieving money for your clients on a 'no find, no fee' basis, you can perhaps understand a degree of scepticism. Watson, a qualified ACCA, runs Caatalyst as its managing director, from offices near London Bridge, and his business is profit recovery. He and his colleagues are detectives. There's £500,000 unclaimed VAT here; a £250,000 invoice paid twice there. And these actual figures, Watson acknowledges, are the sorts of lost sums to make any company FD blanch.

Watson says: 'We analyse our clients' historic financial transactions, usually going back between three and six years, looking at initially historic accounts payable transactions where suppliers have been overpaid. This might constitute a duplicate payment, an unclaimed credit note, an unclaimed discount, an incorrect charge under a contract agreed with that supplier and also VAT which has been missed which we claim back from HM Revenue & Customs. We identify, confirm and recover the item in question, and when the client has received the money back, that is when we will bill our percentage fee, which is a contingency fee based on successful recovery.'

Elementary then, my dear Watson? Not quite. Once appointed, Watson has to tread the diplomat's path, gaining the client's trust in handling its sensitive financial and transactional data; achieving buy-in and confidence from the client's resident FD and financial team, and conducting Caatalyst's analysis and investigations with integrity and without disrupting the client's business and alienating its suppliers. 'We make a massive effort to build a good rapport with the finance team,' he says, 'and explain to them what we do and why we're doing it.' Watson says he does his best to involve the resident finance team closely at all stages, to highlight how the found items have occurred and to strengthen the client's financial policy and controls to ensure the problems cannot recur. 'Pro-forma invoices,' he asserts. 'That's a classic. You get pro-forma and then you get a tax invoice. You pay both. The sums can be quite massive. But we look at the small items too. We go from £50 upwards.'

The nitty-gritty of the work commences with an offsite software scan of the client's data files, followed by a detailed manual review and a further review, and double-check on site. But while the technology is a key element in the work, Watson believes that having the right team in place for the job is absolutely critical. 'The people we have, their experience, their focus, makes a huge difference. You could buy some off-the-peg software and you might find, say, 25% of what our people will find,' he says. 'And the way our people relate to everyone in the client company is absolutely fundamental, from the cleaner, to the accounts payable clerk, to the FD.' Watson encourages his staff to study for a professional qualification as something which will give a formal structure to which their practical experience can relate and enable them to further their careers. He is very positive about the flexibility offered by ACCA.

Watson himself began his accountancy career with Stoy Hayward, but after initially stalling at examination stage, he joined a fashion retailer, watching it grow in two years from a four-person company to one employing 300, and becoming European financial controller in the process, a time he describes as an 'amazing experience'. During this time he began studying for the ACCA qualification, which he clearly values, saying he is 'very proud to have achieved it'. Subsequently, he joined a Virgin Group company as a general manager which he describes as a 'bit of a leap to be honest'.

Establishing client base

But the entrepreneurial bug had bitten. He wanted to run his own business and while subsequently working for TMP Worldwide, he met a contact with some experience of the business his company now operates, and thought 'What a great idea, let's go for it'. What then? 'It was all about getting the first client, frankly,' he says. 'I thought if we could get that client we could really do it. I felt that I had enough experience of working with and implementing different financial systems at different places. I knew what these guys were going through and what the pitfalls were, and in my own work I had seen loads of errors, big ones too. It was a case of saying “Let's get on with it”, and winning that first client.'

At that time the business was a partnership, and the opportunity to prove themselves was offered by British Midland Airways. 'We really focused on them for the first year-and-a-half and built a very good relationship with the team.' The rest, as they say, is history, and Caatalyst now counts Virgin Atlantic Airways, Volvo, Daimler Chrysler, Adidas and Alcan among its clients. The company also works in the public sector for, among others, the London Boroughs of Greenwich and Harrow.

Watson admits that there can be considerable variance between companies, whether in the public or private sector, in the money recovered on investigation. Ultimately, Watson again puts this down to people. 'If you've got good people, who've been there for seven or eight years who are motivated, that tends to stop a lot of these mistakes,' he says, 'even if they've got some quite ropey old finance systems and possibly not the most modern processes. In other companies, where they say “You'll find nothing here”, and where they have fantastic new systems, there may be a team of temps who haven't been trained properly, or the new system may have bred some complacency in terms of reviewing and checking transactions rigorously.'

Optimistic outlook

Caatalyst has doubled in size each year for the past three years, and today many new clients come from personal recommendation. But Watson is also clearly a fan of the internet as a marketing tool and extols the virtue of the web. And while he believes that there is significant competition in the marketplace, he is optimistic that there is plenty of business for which to compete, and remains quietly confident. 'I think we do things rather differently from some of our competitors,' he says, and refers to the number of clients who have retained Caatalyst's services over the long-term. He is critical of the approach of some rivals who, as he puts it, 'go in hard, take the money and shove off', and regards successful client retention as critical to the continuing success of the business, while conceding that the more successful he is in finding lost money and advising clients on their practices, the less he may discover next time around.

Innovation, as usual, is the key in nurturing established relationships and maintaining profitability. 'We have to devise new tests and ways of finding the money,' he says, but adds that the challenge is mitigated to a certain extent by the ability experience provides to do things more quickly. So, onward and upward? Watson thinks so. A competitor has recently been bought by Accenture, he says, something which he finds scary and challenging in equal measure. Watson's goal is to develop Caatalyst to the point at which it can compete effectively with the largest players in the UK without actually becoming too unwieldy an organisation and without sacrificing quality of service. He is also developing a wider European presence in Ireland and the Netherlands.

Caatalyst has clearly been a success story for Watson, based on his, and his team's, entrepreneurial flair and hard work. But elementary? I don't think so.