Small and medium businesses lose around £15,000 a year because of poor financial management. We look at ways to up-skill without increasing overheads.
Are you a business owner falling into the most common SME financial trap – by letting unqualified staff look after your finances? A staggering 80 per cent do, but it’s not too late to take control of your financial management by following our key steps.
Research by the Association of Accounting Technicians (AAT) showed that small and medium sized businesses were losing around £15,000 a year on average because of poor financial management. To a growing start-up that could mean the difference between survival and total failure.
There are several simple steps business owners can take, which will give them immediate returns as well as providing long-term financial stability. Most start-ups wait two years or more before seeking professional support, and that can be a big mistake.
Don’t wait to consult a financial management expert
There’s always a good time to get help from financial experts, like Oscar Fairchild – and that time is right now. The more you know, the more pitfalls you can avoid, and the more benefits you’ll reap for your business during this financial year, and in the long-term as your business grows.
Kim Redwood-Lee says: “It’s still fairly early in the financial year. There is time for business owners to make changes now in order to get to grips with their financial blind spots and drive growth. By engaging an AAT qualified bookkeeper and accountant like Oscar Fairchild, you can bolt on smart financial support and upskill your business without hiring in-house and increasing staff overheads.”
SMEs can often dig themselves into a huge financial hole by leaving office juniors or totally unqualified staff in charge of their bookkeeping and general financial jobs. You wouldn’t let unqualified staff out to provide skilled services to your customers, so why would you do that to your own business?
Identifying your hidden numbers person and investing in skills training is the wise act of a smart business owner. You bring some financial knowledge in-house, you have somebody who can liaise with the external bookkeeper or accountant you hire, you give welcome responsibility to a more engaged member of staff, and the benefits are long-term. AAT reckons accountancy skills learned now will still be relevant in 10 years.
A simple plan for better financial management
With your numbers person upskilled, you’re in a better place to avoid the obstacles that litter the road to sustained business growth because of financial management failure: a lack of any financial strategy; poor tax planning; and cash flow that works against you rather than for you.
So focus on these four points up front:
- Tax planning
- Ring-fencing income
- Rainy-day planning
- Strategic investment
We always start our new clients with some simple tax planning. Get a calendar and mark the key dates of the tax year on it, or set them in your laptop’s system as reminders. Then work towards them by ring-fencing a percentage of income to cover tax and VAT liabilities further down the line.
Your alarm bells may already be ringing so loudly that you hand everything over to your expert external accountant or bookkeeper. But your better-trained staff member could help you set up a reserve bank account, to get you over any crisis that could otherwise cripple your business.
And then with your eye firmly on growth, identify where you can make strategic investments to put you on the right path. That may well be maintaining your staff member’s skills training, as well as finding expert accountancy and bookkeeping support externally.
Kim Redwood-Lee’s Top Tips:
- In-house financial management skills give you the ability to improve basic financial management
- Seeking external financial expertise can take your financial planning to another level
Poor financial management results in poor performance
Those four in five small businesses AAT identified have one thing in common – on top of losing an average of £15,000 a year. They also plan poorly when it comes to financial management.
That most likely shows itself by having inadequate bookkeeping systems that are not fit for purpose. And having out of date or incomplete management accounts, so they can’t see a snapshot of their financial position at any one time.
With no real-time financial analysis of their business, how can SME owners make effective business judgements?
Keep your profits up, your debts down within safe levels, protect your revenues and safeguard your growth by turning your attention to effective financial management – both in-house, and by seeking the external expertise your business deserves.
Request a call back from
our friendly team >>
About Oscar Fairchild:
Oscar Fairchild (incorporating Redwood Clarke since 01.09.18) is an Association of Accounting Technicians (AAT) qualified accountancy & bookkeeping practice with offices in The City of London and Billericay, Essex. Offering a wide range of services including Self-Assessment Services, Annual Returns, VAT Returns, Credit Control, Payroll, Auto Enrolment Pension and Management Account services to high growth businesses across London, Essex and Hertfordshire.
Contact us today to discuss how our flexible outsourced accountancy & bookkeeping service could deliver consistent, professional help to your business >>.