Failure to put a financial plan in place, misunderstanding cash flow and not setting aside funds to pay taxes are all major threats to sustainable SME growth that represent errors that continue to be made frequently by small business decision makers.
New research from the Association of Accounting Technicians (AAT) has revealed that as many as 80% of UK SMEs have an individual who is not in a qualified financial role managing their company accounts and financial information. The result is a potential average loss of around £15,000 a year per business.
Suggesting that the average small business is in urgent need of more accountancy skills, the AAT’s findings urge SMEs to find the “hidden accountant” in their team by upskilling existing staff to deliver sustainable growth.
With the average small business owner only accessing professional accounting support once every two years, the benefits of upskilling existing staff for the long-term financial health of an SME are numerous.
Five-point checklist for sustainable SME growth this financial year
(1) Set up a reserve bank account for a “rainy day” fund
(2) Ringfence a percentage of regular income to pay for tax and VAT later in the financial year
(3) Spend strategically on investments that will deliver growth – for example, marketing)
(4) Mark key tax dates on a calendar to plan ahead
(5) Find your firm’s “hidden accountant” – for example, train a member of your staff in accountancy skills
“As we are just a few weeks into the new financial year, we are advising SMEs to make use of finance skills as early as possible to help deliver sustainable growth,” said director of strategy and professional standards at AAT, Adam Harper.
“Businesses can engage an external accountant to provide vital support but should also consider looking for their own ‘hidden accountant’ – that colleague who is best placed to upskill and keep your business in good financial shape on a day-to-day basis.
Effective financial planning is critical for SMEs as they often lack the funds to manage an unexpected crisis.
“There are a number of simple things every business can do to avoid some of the most common financial pitfalls, and free resources, such as the business advice website Informi, can prove invaluable in helping companies recognise areas in which they can improve their management of finances.”