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Small businesses fail to seek cash-flow management help

Less than a sixth of small and medium businesses are engaging their accountants for assistance with cash-flow management despite its importance, says a non-bank lender.

Business Aidan Curtis 05 June 2020
— 2 minute read

According to a Scottish Pacific report, SME Growth Index, only 16.1 per cent of SMEs are seeking cash-flow management advice from their accountants.

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Scottish Pacific chief executive Peter Langham told Accountants Daily the low percentage of SMEs seeking assistance with cash-flow management is usually down to SME owners being “time-poor”.

“[Owners] wear many hats and in this economic climate, they have even more to do with increased urgency,” Mr Langham said. 

“Sometimes, they just have their heads down grinding away and don’t get time to think about asking for help.

“Those who are qualified to help, like accountants, need to reach out and offer help — and that isn’t sending emails; it’s picking up the phone and asking. If taking up something like debtor finance to relieve pressure is an option, many business owners will be either too busy to seek it, or unsure of the benefits.”

Mr Langham added that he believes the COVID-19 crisis should spur SMEs to seek cash-flow support more often.

“Previous SME Growth Index research found accountants are the trusted advisers that have the most positive business impact on SMEs,” he said.  

“82.9 per cent of small businesses who nominated accountants said they had helped the business, compared to 68.8 per cent for family members, 58.8 per cent for business colleagues and 27.1 per cent for friends.

“There is also a key role for accountants to play in providing information on how to access credit for their SME clients, reducing costs, preventing insolvency and improving cash flow and revenue.”

Accountants key to unlocking SME potential

According to Scottish Pacific, the role of accountants in the SME sector is showing signs of evolving beyond tax and end-of-financial-year matters.

However, while those signs are positive for SMEs, Scottish Pacific believes that the role of accountants will need to continue to expand for the SME sector to “unlock its potential”.

The SME Growth Index found that more than 99 per cent of SMEs rely on accountants for “the traditional functions” of tax returns, annual accounts and financial records.

“Accountants are also very involved in SME owners’ personal tax affairs (64.4 per cent) and in helping with succession planning (56.6 per cent),” the report said.

“The index results show there is room for improvement in how accountants are used by SMEs for value-add areas including advice on funding options (only 46.8 per cent of SMEs turn to their accountant for this), business strategy and planning (31 per cent), advice regarding selling business assets (17 per cent), cash-flow management (16.1 per cent) and major acquisitions (14.3 per cent).

“A successful and thriving SME, we would suggest, is one that is likely to be using an external accountant not just for ‘number crunching’ and end-of-year tax, but for value-add business strategy and cash-flow management assistance.”

Small businesses fail to seek cash-flow management help
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