In the recent Budget, George Osborne introduced a number of measures that were aimed at helping small and medium-sized businesses, which have been identified as playing a key role in the UK's economic recovery.
However, small businesses also need to work towards making themselves fit for growth and to do this they need financial expertise. Currently, the majority of UK SMEs have no staff with any financial training which can prove detrimental to business development.
A common stumbling block for small businesses is access to finance. It is no secret that securing finance from banks is difficult for SMEs. Cash flow, or lack of it, is often a crippling characteristic of many small businesses. Yet small businesses can ‘tool-up' and make themselves better suited for the business environment and finance-ready to access much needed funding.
Research has shown that small businesses with well-developed finance functions achieve faster, more sustainable growth and are more likely to attract investment to help them develop.
The role of the accountant in an SME business goes well beyond the basics of bookkeeping and they can provide support at different stages of an SME's development. An accountant is vital in getting the business in shape for securing investment and credit, which can mean the difference between failure and survival.
Credit providers, supply chain partners and other stakeholders need a wealth of information from the finance team of an SME. For some investors the information they require changes after investment to focus on other aspects of the business, such as agreed milestones. Finance professionals are central to providing that insight into the business.
Day-to-day financial management is the key to accessing finance. The chance of securing any kind of funding will depend on how the business has been run up to that point. Independent research confirms that a well-run finance function staffed with appropriately trained people, makes SMEs more creditworthy and investment-ready, and is a cause, not a consequence, of growth.
Complete finance skills
Typically, many small enterprise owners attempt to do everything themselves, but there is a lot of red tape for small businesses to contend with. Many business owners spend more time tackling financial matters, such as tax, reports and cash flow, instead of concentrating on the business itself.
Statistics from BDRC SME Finance Monitor show that in the UK, 17.4% of SMEs with regular management reporting, a formal written business plan and financially trained staff, grew more than 30% and 10% of those companies had a minimum risk rating. Just 7.5 % of SMEs without that financial expertise and support grew 30% and only 2.5% had a minimum risk rating.
ACCA's research suggests that the role of finance professionals is widening and taking on a more business-focused nature, which is of particular importance for SMEs. From infancy to eventual growth into a larger enterprise, the role of the finance function will change and adapt to the needs of the business. The accountants who help a new start-up get off the ground will play a very different, but equally critical, role when that business is in full, sustainable growth mode.
If there is any doubt about how critical finance expertise is to SMEs, Delta Economics research shows high-growth firms are most likely to reach their maximum growth rate just three years from registration. At such an important period of change, having a finance professional on board that can support the business from start to high growth and beyond is crucial to success.
Rosana Mirkovic, head of SME policy at ACCA (the Association
of Chartered
Certified Accountants), the global body for professional accountants
