At the earliest stages of operation, entrepreneurs are consumed with growing their nascent business at productive growth rates, while expanding turnout and increasing cash flows. However, many Small and Medium Enterprises (SMEs) falter at maintaining the growth rates they had originally achieved during their first five years of operation. The reasons behind this common phenomenon vary from one business and industry to the next.
Global statistics indicate that approximately 80% of startups survive their first year. However, only about 50% of SMEs survive past the five-year mark, ranging from 45.4% to 51% depending on the year the business was started1. A prominent variable of success is choosing and updating the right accounting and finance practices a business employ.
SMEs tend to approach the accounting and finance side of their business from a basic bookkeeping perspective. However, as businesses grow, the need for more advanced accounting practices and financial insight becomes imperative. In most cases, adding responsibilities that require a higher level of experience and expertise onto the plate of an entry-level accountant does not set the business up for success.
Business owners feel at a loss as to why their businesses plateau and can’t break through to the next stage of growth after several years of growing profits. An important and often neglected element is that these entrepreneurs did not have a true picture of their own business’s profitability or an accurate assessment of their company’s financial position. Having these, would have allowed them to strategically anticipate cash flow to invest in upcoming operations.
Choosing the right accounting firm and updating your finance practices has the power to breathe life into your struggling business. It can help you determine whether your current bookkeeping and accounting practices are contributing to the growth hiatus your small business is experiencing. Expert accounting firms add strategic insights and value to entrepreneurs who seek to grow their businesses.
Outsourcing your accounting needs an experienced and digitally enabled accounting firm, a solution that can give you the strategic edge you need. This addition to your team can give you a leg up by conducting a work plan analysis that gives you a detailed understanding of your business’s financial and accounting status, through financial statements that offer in depth insight. After a careful understanding of your business’s shortcomings, critical updates can be easily incorporated and implemented to revamp your business’s growth and help it reach the desired next growth level.
Many steps can be adopted to give SMEs a boost to grow, including:
- Adopting updated and standardized steps for true accrual accounting
- Scrubbing the books to establish confidence, clarify gap reporting, and set up reconciliations
- Implementing proper transactional systems and a process manual that the team can follow
- Putting a virtual CFO in place to provide ongoing strategic expertise, leadership, and guidance
- Establishing new management reporting (e.g. annual budget, meeting disciplines, scorecards)
Bookkeeping, accounting, finance structures and processes serve a company in its infancy to achieve different milestones of growth. But remember that entrepreneurs who get overloaded with business development and operational concerns, can easily lose sight of how deficiencies in their accounting and finance practices are affecting their ability to move the business forward.
Joining forces with Leverage will lend your business a reliable hand at all stages — whether at the launching, planning, or second stage of growth. Through our capable, professional, and expert virtual CFOs, advanced bookkeeping tools, and digital solutions, Leverage will be your insightful partner so you can make strategic decisions and have a clearer picture of your business’s figures enabling its sustainable profitable growth