SMEs, or small-medium enterprises, are the definitive business model in the UK. They amount to well over 99% of businesses active in the UK, and in so doing account for around 60% of all employment too. The ‘small’ part of SME, meaning businesses with up to 49 employees, account for a vast majority of this too – indicating the unique groundwork laid by UK governments to enable burgeoning entrepreneurs the chance to thrive.
But starting a business is only one part of a much larger equation – and keeping it running is a matter of more than entrepreneurial instinct. In order to remain one of those 5.5 million SMEs defining the UK’s economy, you need to have a strong grasp of your own business’ economics, from the ground up. Without good accounting practices, you are far more likely to be one of the start-ups that fails in year 1 than you are to become a stalwart SME. What, then, should you know about accounting for your SME?
- Embrace Cloud-Based Accounting Platforms
Your accounting practices can only ever be as good as the software your business practices within – and today, the software options available to you are broader than ever before. If you’re at a point where you’re choosing your systems, consider adopting cloud accounting software over anything else; this enables you to benefit from real-time financial tracking, remote access to reports, and seamless collaboration between departments or business arms. Cloud solutions also allow you to benefit from scalability, meaning growth is easier to manage.
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Subscribe- Implement Predictive Financial Analytics
Accounting is, in large part, about fulfilling your tax responsibilities as an SME. However, accounts are more powerful than this, if wielded correctly. As a smaller business, you may not have the expertise necessary to drill into your figures, but by working with SME accountants, you can enter into a new world of predictive analytics. Through outsourcing financial analysis, you can forecast cash flow, identify financial risks, and make informed decisions based on the data you keep.
- Streamline Tax Compliance and Planning
The fundamental purpose of tracking your accounts accurately, though, is still to ensure you remain legal and compliant as a business. In fact, with effective accounting methods, you can also engage in tax planning – an engagement with your business’ finances and structure that enables you to both minimise liabilities and make full use of available business-related tax reliefs. As a function of this, you’ll be able to stay updated with changes to relevant tax regulations.
- Optimise Cash Flow Management
The health of a business is often measured by its cashflow – that is, money in versus money out each month. Negative cashflow can be a result of using profits to invest, but can still be regarded as a marker for downturn by investors. With sold accounting, you can utilise cashflow forecasting, proper management of receivables and payables, and contingency planning to placate stakeholders and stay liquid.
- Develop a Financial KPI Monitoring System
Finally, you can use your accounting department to help you identify key performance indicators (KPIs) for your business, be they percentage profit increase or other financially-borne productivity criteria. By regularly reviewing KPIs, you can make proactive adjustments to your strategy, and otherwise measure the effectiveness of strategic decisions.
