In a recent AAT survey, the average amount that poor financial management can cost a business per year was estimated to be as high as £15,870.
And not keeping an effective eye on cash flow is, overall, the second-highest reason for business failure – after there being no market demand for the product or service.
But by having someone inside the company who has strong financial knowledge, SMEs can fend off the risks of cash flow vulnerability – providing accurate tax information to HMRC, keeping a finger on projections, and alerting the rest of the business to potential problems.
With recent data from the FSB suggesting that small business owners can lose up to 15 working days a year on tax compliance, there’s never been a better time to make a ‘new tax year resolution’ and find the hidden accountant in your team.
So what are the advantages of having someone with accountancy skills in situ?
“A financially skilled employee can bring a sense of financial reality to business transactions and help convert a sales-minded optimism into a business manager’s reality,” says Tim Birkett, Director, Birkett & Co, Accountants and Tax Advisors.
Gina Gardner, a corporate tax trainee accountant at Randall & Payne LLP and one of AAT’s Rising Stars, adds that there are cultural benefits too. “Generally, everyone has their own processes. If you bring in someone external instead of the people you already have, they won’t know this is your way of preparing things. That can lead to errors.”
“The goalposts are gradually moving with generational change, but businesses still run (and are ultimately judged) on their finances,” says Mike Copping, Finance Director at Cyber-Duck and LeftBrain.
“If you have accountancy skills then you can ‘keep score’ for a business. Training to be an accountant in the early days is about learning the rules on this – then progressing to the actual score-keeping part, and then working out better, more efficient ways to keep score.
The final part of the journey – and when you get here, you really become an asset to any business – is you develop ways and ideas to change that score. You learn how to judge what the score should actually be, and you can help to influence it for the businesses you work in.”
Yet many companies do not take on an employee to handle day-to-day processes until they are mature – only 24% do so in the first year, similar numbers in years 2 and 3 – but a whopping 12% never take someone on to do the role at all, according to the AAT research.
Enhancing and developing ability can bring in great dividends
Upskilling your existing staff with financial know-how, as opposed to bringing in trained staff as new employees, can bring great dividends. “We have proved this to be a positive advantage in our business – we’re now recruiting our third graduate trainee,” says Tim Birkett.
“In the past, when we recruited staff who had worked in other accounting environments, we found that it took some time to ‘unlearn’ practices they had acquired in their previous employment which weren’t relevant to us.”
By recruiting someone bright and enthusiastic, Birkett says, “you can channel that energy into the ethos of your business. It also helps to motivate more established staff who may be more fixed in their ideas.”
Copping agrees. “With a small company, a new person in a team of ten will be crucial. So finding that person is quite a drain on resources and time. Rather than the CEO or senior management spending 25% of their week for several weeks trying to help this new person fit in, that could be time spent with clients or growing the business.”
Having someone who can keep score in-house is infinitely valuable, Copping says – “in fact, it’s a no-brainer.”
Yet often, particularly in the SME world, “owners and managers don’t take enough time to ask their people – what is it you want to do? Would you be interested in some financial training? Would you enjoy it and would it benefit you?” Indeed, AAT’s survey suggests that the Owner or MD looks after the business’s finances in as much as 64% per cent of small companies.
“What often happens,” Copping argues, “is that people think, ‘John does X. Finance isn’t part of his job. So we have to bring someone else in.’ ” That simply isn’t true, Copping says. “Instead, sit down with John, see what his interests are and whether he has an appetite for training.”
Not only do you save on recruitment costs, you build a loyal, motivated and happy team. “And they understand the business – they already have some status and investment in it; they know the suppliers, for example. Why would you bring someone else in and have to teach them all that from scratch?”
Give those employees responsibility, and great things can happen. The AAT survey reveals that as well as the ability to do the job, gaining accountancy qualifications gives employees more confidence in the workplace (60%), a more analytical way of thinking (79%), and more gravitas in company discussions (38%).
“Look after your employees,” Birkett adds, “and not just by paying them well. They are the frontline ambassadors for your business, so make sure they are acting as such. Simple things help generate a lot of goodwill: the occasional thank you meal for example. And, most importantly, praise them in public but only reprimand in private.”
Other words of wisdom from business owners
“Do not spend more than you earn,” says Tim Birkett. Only embark on business if you have enough working capital to see you through the first six months or so. Borrowed money is dear money. Establishing a positive savings habit whilst you are still employed stands you in good stead when running a business.”
“Everything is about people and time,” says Mike Copping, “and ultimately, time is more important than money.”
More broadly, Birkett adds, “understand early on that not everyone out there is as honest or ethical as you are. It’s good to think the best of people, but not to the extent that you are naive. Trust needs to be earned and that can be a hard lesson sometimes.”
Finally, play the long game. “Don’t be despondent that success does not come overnight. Set achievable goals that can be ticked off in a shorter timeframe.”
To learn more about accountancy upskilling go to our train your staff page.
Mark Blayney Stuart is Business Journalist of the Year, Wales Media Awards 2017 and Former Head of Research at the Chartered Institute of Marketing.