RegulationBusiness RegulationEmpowering small businesses to get financially fit

Empowering small businesses to get financially fit

Alison Ball looks into how accountants can play a valuable role in helping their small business clients get, and stay, financially fit

WITH THE EUROZONE crisis deepening and another recession looming, small businesses up and down the country may face even tougher times ahead. In light of this, the Government has outlined its commitment to support Britain’s small and medium sized enterprises with the launch of a business growth package.

As well as measures to help SMEs secure finance and cut red tape, the Government has recognised the role that accountants can play in helping small businesses by enrolling the Association of Chartered Certified Accountants (ACCA) to provide free advice to SMEs on how they can get their books in tip top shape.

What are your clients struggling with?

Poor financial management continues to be the number one reason why small businesses fail within the first three years of launching. According to a recent Intuit report entitled, “The Three Year Glitch”, more than one in five small businesses still rely on pen and paper accounting.

As a consequence of their lack of organisation throughout the year, nearly a third of UK start-ups have made mistakes with HMRC, one in five has missed payroll and almost three quarters found managing their finances in the start-up phase stressful. With the self-assessment deadline looming and accountants facing the last minute deluge of tax data from their small business clients, this is the perfect time for accountants to step in

How can Accountants Help?

Accountants can play a valuable role to help their small business clients get through these cash flow difficulties, keep on top of financial reporting and avoid becoming a victim of the three year glitch. In particular, they can assess the business health, get the client set up on good financial management software, and provide advice and a roadmap for the client to follow moving forward.

With companies looking to make cut-backs during these cash-strapped times, accountants more than ever need to prove that they are able to provide support that goes beyond the financial administration of the business. There is a significant opportunity for accountants to grow their practices by delivering greater advice and support to small businesses and tapping into the pain points that they face today.


Obtaining finance from banks continues to be a sticking point for many small businesses, and measures to encourage more bank lending are integral to the Government’s growth package. Intuit’s study found that 86 per cent of small businesses are self-financed, with 42 per cent of them set up on less than £1,000.

Perhaps not surprising, about one in 10 businesses operating less than five years ran out of cash, whilst one in three came ‘very close’. So while these findings show that start-ups are capable of getting by without bank finance, setting up a business on such a small amount of savings means they are walking a fine ‘financial tightrope’.

With this in mind, accountants can help their clients to initiate and maintain an effective dialogue with their banks by advising and assisting with the preparation and presentation of financial statements.

By providing accurately presented and properly formatted financial reports and supporting schedules,, clients are more likely to see an improvement in their relationship with banks and increase their chances of securing funding. Accountants can play a vital role in ensuring that the results of operations are properly presented. In addition, a solid financial management software package can make organising the books and creating reports less onerous overall. Financial management software not only saves time but can help small businesses track against their business plan.

Late Payments

The three year glitch report also found that three in five UK start-ups suffer late payments from customers. The issue of late payments is an ongoing problem for many small businesses due to a general lack of credit control understanding and procedures.

As the economic climate worsens, late payments are likely to increase. Here, accountants can advise their small business clients on the basic tenets of credit control, such as ensuring invoices are sent out promptly and ways to encourage customers to pay on time.

Accountants can also give their clients advice on installing practical systems to manage invoices and monitor their debtor days’ position to effectively reduce them. Financial management packages will have these basic accounting tools built in so that small firms can improve their payment record on their own leaving their accountants to focus their time with them on more valuable tasks.

Tax compliance

Nearly a third of start-ups make mistakes with HMRC and for 14 per cent, this results in a fine or an overhaul of financial processes. This statistic shows that tax compliance continues to be a ‘taxing’ issue for small businesses.

As HMRC continues to clamp down on tax evaders and inaccurate business records, the last thing small businesses need is to be hit with unnecessary and avoidable costs. This is where accountants can adopt a more hands-on approach by providing appropriate and regular advice on how to be tax compliant, how to properly organise business records, and how to minimise tax liabilities.

Help small businesses to help themselves

While accountants can meet with clients more regularly, the truth is they cannot be present at all times. Therefore, accountants need to empower their clients to better manage their finances on a day-to-day basis so that when they do meet, they can provide those value-add services that will help their clients’ businesses grow rather than just survive.

Getting clients off pen and paper records and spreadsheets and implementing automated processes is the best way to address the pain points above, whether that be ensuring invoices are managed properly and that debtor days are monitored, or predicting how much cash needs to be set aside for tax payments. Furthermore, accounting software can help small businesses adhere to good financial disciplines such as budgetary control and general forecasting and business planning.

Some practices hold evening briefings and invite clients to a semi-social gathering to explain how they can help themselves. It’s an opportunity to build your relationship, tell them what reporting processes have changed and remind them of key points where mistakes are often made, for example ahead of the 31 January deadline.

The bottom line is providing appropriate and regular advice on how to better manage cash flow as well as encouraging clients to utilise other mechanisms of financial management support can prove invaluable to small businesses in the current economic climate. Not only will this ensure that the best service is being provided but that clients are ultimately satisfied and continue to invest in their accountant’s time.

Alison Ball is head of accountant programs at Intuit UK

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