How robust forecasting and cash flow management can help your business access finance



According to a recent report SMEs are struggling to obtain finances when their business needs investment. Here, Director at Beatons Stephanie Hammond, outlines some of the ways to ensure your company stays attractive to lenders.

Running an SME – or any size business takes time and investment and often that investment requires outside finance.

Accessing finance is a normal part of business for most companies but a report published by the Association of Chartered Certified Accountants (ACCA) has suggested that small and medium-sized enterprises (SMEs) are struggling to access finance and working capital.

The ACCA's data showed that small firms are struggling to access finance for a range of reasons, including rising interest rates.

57% of firms reported that borrowing in order to manage cashflow has proven more difficult over the last quarter when compared to the previous 12 months.

47% stated that supplier credit is now harder to access, and an additional 27% said that accessing support from HMRC's Time to Pay initiative is harder.

Barriers like these can be a big problem. It’s no wonder that the figures for SMEs that have been forced to close are high too.

There are always different factors around why financiers say no, such as economic conditions and other outside forces.

However, Beatons can advise on best practises to ensure that your business is robust and in good shape should you wish to obtain loans or working capital – or avoid having to do so.

There’s lots of information on managing cash flow on our site here and more nuggets of important information on financial forecasting here:

Director at Beatons Stephanie Hammond said:

“Financial control is key here, making sure that you can demonstrate good record keeping and a secure knowledge of your profit and loss as well as cash flow.

“Financial control is what ensures your business sustains and improves profitability – and part of that could mean being able to access finance.

“Our experts have many years of experience in forecasting and cash flow management. Good control gives your business much more power – and you as the owner or directors confidence in seeking support when it’s needed. “

What does sound financial control look like?

  • Being able to decide which areas you need to monitor and how frequently
  • Generating the numbers quickly and accurately
  • Being able to share the results with everyone who needs to know them
  • Interpreting the numbers correctly

Stephanie added: “SMEs that have struggled to access finance might need to reassess how they are recording the finances and what data they have available about how the business is performing. Only knowing the picture from a few months ago isn’t useful enough and directors need accurate, up to date information to share with finance decision makers.

“The first step is to set up a system that enables you to generate reports quickly - certainly no later than ten days after the month closes.

“A system that gives you very regular updates on sales, creditors, cash position etc is ideal. Beatons can help with getting this in place.”

“This way you can take appropriate and timely action based on your interpretations of the data – and in the long run this may cut your chances of needing to apply for finance at all.”

Often, it can be outside influences such as late payments or other firms going bust, that put the pressure on your business.

But having sound cash flow management and other controls in place helps to protect against the effects of these.

The report published by the ACCA found that small firms found late payment to be a 'persistent problem' in the UK, creating barriers for cashflow throughout supply chains and leading to adverse consequences for some businesses.

Late payments by large businesses have the most detrimental impact on small firms, the research revealed, generating a 'domino effect' throughout supply chains.

Stephanie said: “Cash is the lifeblood of a business. Of course, the bottom line is important, but poor cash flow management can drive even a profitable company out of business, especially if the economy is struggling.

“The risk is especially great for new and expanding businesses. For example, if billing is delayed at the same time as stock is accumulated to fulfil increased orders, you can find yourself short of the cash needed to pay suppliers and employees.

“A properly prepared cash flow projection can help a business foresee and prepare for potential shortages and surpluses.”

Cash flow feeds directly into budgeting – helping you to assess ahead of time the need for any loan injections. Once you've projected your cash flow based on this forecasted data, you can budget for capital expenditures, unusual sources of cash or other things that might affect cash flow.

Stephanie added: “While it can be tough out there, going back to the basics and reassessing how your businesses deals with cash flow forecast could help you manage debt more effectively, maximise your return on excess cash and ensure that funds are available when they're most needed.”

Beatons has decades of experience in profit and loss forecasting as well and cash flow management and can support your business in driving up these areas of reporting, for the best possible results.

Get in touch with the team or call 01473659777.