Small businesses can be fragile, subject to forces that are often beyond their control. It’s also almost certainly true that SMEs have a greater vulnerability to wider economic trends than their larger peers. That’s not to say that small businesses are inherently unstable, far from it, but the current uncertainties in the UK economy seem to be having an effect across the SME sector.
The recent publication by the FSB of its Voice of Small Business Index Q2 2017 provided a number of statistics that suggest some economic trouble ahead. The report found that the number of small firms expecting to downsize, close or hand on the business over the next 12 months has increased for the second consecutive quarter, with the figure now standing at 12.0%.
In addition, small business confidence has also dropped for the first time since the wake of EU referendum while cost pressures are at their highest level since Q2 of 2013.
No matter how you spin it, these are uncertain times and while I don’t want to drag you into another discussion about Brexit, we have to face the fact that the trading environment for small businesses contains more challenges than we’ve seen for many years.
It’s to be hoped that any business owners who find themselves struggling for whatever reason, would consider contacting their accountant for help. I’m sure all accountants will have their own stories to share, but common small business woes include poor bookkeeping practices, sudden changes in cash flow, demands made on them by customers to offer extended payment terms, poor management of debts and inaccurate sales forecasts.
There’s a lot that an accountant can do to assist with many of these issues and I do think that it would be great for accountants to promote this more - so business owners know this is an option. A lot of business owners, small business owners particularly, still make banks their first port of call when things go wrong, when in actual fact an accountant would be a more helpful choice.
However, there will be a number of issues that an accountant may not automatically have the knowledge to deal with when they come across their desks.
Funding is one of these issues. All the bookkeeping knowledge in the world won’t be able to help a distressed customer with a cashflow crisis or one with an order book full of jobs they can’t fulfil.
Accountants should know, however, that there are plenty of lenders who may well be able to help even those small businesses with the bleakest financial outlook.
Accountants who invest some time in getting to know this area of the financial services market, will be even better equipped to give comprehensive, constructive advice to those customers that are finding the current economic seas tricky to navigate.
About Rob Mercer
Senior Regional Director, Ashley Finance.