By Emma Cooksley-Lewis, Director of C2It Commercial Collections
In the UK, around 400,000 business start-ups launch every year. A third of these fail within three years. It is commonly believed that lack of customers kills these new businesses, but in reality it is a lack of cash.
Early financial decisions are among the most difficult an SME will make, but they are vital to the success of the business. Getting these decisions right, having the appropriate financial plans in place and executing these plans effectively will help your business grow and adapt to changes in the market or economic environment.
You should also contact a qualified professional advisor, such as a lawyer, bank manager or accountant, to discuss your business plan.
Cash-flow management is essential as small businesses can fail if they run out of cash. A small business should seek qualified independent financial advice before accessing finance. Audit, assurance and management accounting are good places to start when sorting out finances.
Depending on the size of your business, you may have to conduct a mandatory audit. Even where not compulsory, an audit can support businesses growth. The involvement of an auditor can also help with tax and regulatory issues and access to funding.
SMEs may qualify for an audit exemption if they have at least two of the following:
• Annual turnover of no more than £6.5m
• Assets worth no more than £3.26m
• 50 or fewer employees on average throughout that turnover year.
You can chose to manage your own accounts, but if you don’t have adequate resources in place it may be advisable to seek support with cash flow, debt recovery and management structures. These areas can contribute heavily to the downfall of small businesses.
C2it Commercial Collections helps SMEs optimise invoice collection, recover debt and manage cash flow. Click here for our ‘Guide to Financial Management for SMEs.’