The thought of dealing with tax returns is enough to give most SME business owners a severe headache.
We’re into another financial year and the Budget for the remainder of 2013 has been set. Getting the financial year-end details out of the way means a huge sigh of relief from businesspeople that it’s ‘all over’ for another year.
According to the recent annual Credit Check Report by ABN AMRO Commercial Finance, accountants were asked to comment on the current state of SMEs and their financial acumen – and the results weren’t good.
Less than half the accountants asked (39%) said their client understood financial matters, while more than half (51%) said that their clients didn’t feel in control of finance!
Government efforts to support SMEs might be genuine but for those at the sharp end, the message is falling on deaf ears. Many accountants said their clients were using the wrong type of funding and banking – personal accounts and business overdrafts being the preferred method of storing cash as well as finding it when times get tough.
Red tape and banks refusing to lend could account for the lack of what accountants call ‘proper funding’, so it seems SMEs are struggling to access the cash-flow needed to grow and prosper.
More worrying perhaps in these straightened times is that up to 40% just bury their heads in the sand when it comes to dealing with money – not surprising when 48% said they found finance confusing.
The reasons for a lack of knowledge were simple: no time spent getting to grips with one of the most important elements of their business – money.
So how do you get better at understanding finance for your business?
Go back to school
If you are serious about succeeding in gaining knowledge of business finance, then educating yourself on the subject is the number one way to do it. It takes time and money to enrol on a business finance course – and it won’t be possible for many SME owners. But there’s no escaping the fact that formal study will teach you the basics better than anything else.
If you haven’t got the time to study in a college environment, then read more books! There are billions of words out there on understanding business finance. Libraries are full of them if you don’t have the spare cash to invest. As well as practical books and books on understanding specific parts of taxation and business finance, you’ll find plenty of books written by financial whiz-kids that are both informative and entertaining.
Listen to others
Mentoring programmes provide first-hand knowledge of what it’s like to run a business. Get in touch with your regional enterprise organisation and get access to these. Mentoring is one of the most proven ways of gaining the business insight that leads to success. Virgin chief Sir Richard Branson cited the influence of the late Sir Freddie Laker on his business career. If one of the world’s most successful entrepreneurs listens to others, shouldn’t you?
Get proper advice
At the end of the day, a reputable accountant has all the advice and knowledge that you don’t. Their advice should be impartial and if you follow it, then you shouldn’t get into trouble.
The hardest part of course is making your business a success and generating the cash in the first place. But don’t overlook finance – it will cost you in the long run.
Visit The Business in You for lots of practical advice and support on every aspect of running a business – including finance.