In my latest Business Finance Bulletin Episode 101 I briefly reviewed a survey which revealed that businesses which keep up to date financial records are likely to grow twice as fast as those businesses with information more than nine months old.
This is such an important topic when it comes to raising finance that I thought I’d go into it in a little more depth.
The survey was carried out by KPMG Small Business Accounting and focused on how businesses can perform better when they have up to date financial information to hand.
KPMG found that small business’ management accounts are, on average, four months out of date, not a finding I can disagree with. However, more interestingly they found a direct link between having current financial information and likely growth rates.
They discovered that those with accurate information grew twice as fast as those with nine-month-old data over the last twelve months… 8% compared to 4%. A compelling reason if there was one to keep on top of your books!
This is a finding I can relate to. In arranging commercial finance for businesses, whether that’s for additional working capital or long term funding, one question the majority of lenders will ask is ‘can we see the latest management accounts’. Those who can deliver on the request have a far higher chance of getting finance than those who can’t.
On that basis, the survey’s findings that businesses with up to date figures are growing twice as fast is true – they are simply able to grab opportunities which their less organised competitors have to let slip through their fingers because they can’t get the finance arranged quick enough.
The researchers were also able to put a number on these lost opportunities. They estimate that with better financial visibility, small firms would have invested up to £1 billion more in the economy in the last financial year. Outdated financial information is resulting in lower levels of investment, employment, stunting productivity growth and holding back the economic recovery.
Many of the business owners I meet are the first to admit that they don’t like the financial aspect of their business and yet they struggle through trying to do the books themselves (usually in the wee small hours of the morning!), The survey found that small business owners spend more than two and a half hours on average each week trying to stay on top of their finances and probably doing a poor job or giving up!
The result of all this is that many business owners are making important investment and strategic decisions on the spot without a full understanding of their current financial position.
What’s the solution?
The answer is to pass the task of keeping your financial information up to date onto a bookkeeper or your Accountant; outsource it to the professionals. Concentrate on what you’re good at and get people in who love to crunch numbers.
The upshot of all this is the next time you are presented with an opportunity which needs finance then at least myself and other finance brokers will be able to move quicker and hopefully get you that all too elusive ‘yes’.