“Most businesses start the same way, with a brilliant idea. Those first few weeks, months and years are exciting, terrifying, and exhausting all at the same time, and much sooner than you probably imagined, you are going to be looking at the numbers, sales coming in, purchases going out, wages, balance sheets, end of your accounts, VAT returns, lots of bills to pay. Whichever way you look, there are those numbers staring back.”
- Emma Sheppard
Azets’ podcast, Bang The Drum, is joined by Fraser Campbell, UK Head of Accounts and Business Advisory Services at Azets, and Alex von Schirmeister, Managing Director of Xero for the UK and EMEA.
SME owners face a great deal of accountancy challenges, but for every problem there are tools and solutions to help them get on top of their business, finances, and responsibilities.
Time
The biggest challenge to any small business is usually always time, which doubles as their most precious and most sought after asset. With more and more tasks being thrown at you, time is the one thing you just can’t expand.
“The one thing they ask the most is help me simplify, help me take things off of my plate so I can focus on doing what I love, which typically is the very reason they founded the business, and this is also at the very heart of Xero’s promise to its clients.”
- Alex von Schirmeister
Confusing regulation
A constant point of frustration is the ever-changing regulation. Running your business in addition to keeping up with rules in a fluctuating market can be exhausting, but being ignorant of things like registration thresholds for VAT and similar taxes, is a problem. Some don’t find out they should have been registered for years until they’ve spoken to an accountant, and that can be a significant burden on any business.
Deadlines and late payments
It is very common for a business to fall behind on deadlines. Being late with your VAT returns can result in heavy fines, and it’s not easy to get out of the penalty regime once you’re there.
Some turn to technology as a solution, but don't implement it properly. They double invoice, double count items, pay too much tax, double book inventory, or don’t book at all. For businesses with live inventory, retailing, or wholesaling, or online, this turns into a massive problem.
Late payments are when a payment happens days overdue, and this piles up, because the payment conditions agreed upon are abusive or punitive. Repercussions include running out of cash, disrupted cash flow, inability to meet payroll or rent, as well as declining mental health for the individuals at stake.
“The culprits here are large corporations who are basically using it as a line of credit, or unapproved debt, at the expense of small businesses. Our research shows how deeply this impacts small businesses, and that it is getting worse.”
- Alex von Schirmeister
Not looking ahead
A lot of small businesses run everything on their bank account. These days, viewing your business from an income and expenditure perspective, and knowing how your cash flow is going to evolve over the coming months and year, is vital. Being able to react when things get tight can make all the difference.
“In that kind of recession, while it's difficult to plan, you do need to know where you currently are as a business. Are you profitable? How solvent are you? How strong is your working capital? How resilient are you?”
- Fraser Campbell
How can we solve some of these problems?
These pain points can be alleviated with a great deal of planning and strategic thinking. Seeking out an accountant or advisor that knows what your business needs and provides you with the correct tools, will bring efficiency, productivity, and innovation to SMEs and their founders' plans for growth.
Start with the basics
Some businesses try to do too much, too soon. They try to improve three or four areas at the same time, and then nothing gets done. When you're looking to improve your business through technology, take it a step at a time. Address those areas that will give you the most value to start with. Give yourself that time back and the head space to really focus on how you grow your business.
Find a cloud-based accounting software that works for you
“I think what's been great, particularly over the last 10 or so years, is the rise of cloud technology. So, I'm a real advocate of what SMEs can now tap into, with access to types of systems that previously only five or 10 years ago were the preserve of enterprises.”
- Fraser Campbell
Accounting technology is a platform allowing you to keep a record of your transactions, cash in, cash out, checking stock or inventory, ordering, purchasing, selling, and of course invoicing. The technology or cloud accounting should never replace a human partnership, but add to the toolbox available to you.
“If you're not using up-to-date cloud accounting software, then that's the first place to start. Is it properly configured? Are you using all of the functionality that's in there?”
- Fraser Campbell
An uncertain economy, as experienced during the height of Covid, resulted in a lot of SMEs migrating fully online, which saved quite a few businesses. The flexibility and time-saving solutions that come with finding the right technology for your business, is a life-saver.
What should I ask my advisor or accountant?
You should be talking to your accountant about where you would like to be, both from a business and even personal perspective, over the next five to 10 years. While talking about the numbers and taxes is important, the discussions you should be having with your accountant and advisor are around those wider strategic objectives, and building a plan together.
“Every accountant, every advisor, will be able to find a solution that fits for each particular business. And there is no one size fits all.”
- Fraser Campbell
Ask yourself if you are getting the support you need, and if the approach is tailored to you.