There are approximately 4.5 million businesses employing fewer than 250 people in the UK, providing a total of 13.7 million jobs, equating to half the private sector workforce in 2011. However, while such Small and Medium Enterprises (SMEs) are of importance, the survival and growth for SMEs is always a challenge
There are several reasons why SMEs struggle and some of the top reasons are: limited use of technology, inability to innovate, unable to get the right funding, too much work kept to themselves, inability to analyse the business financially and operationally.
A major key to the success of SMEs is to manage their books effectively. These are the key steps to ensure you manage your books properly:
- Identify appropriate person- Identify who can do the books in your business. It’s very important that the person who manages your books understands the basics of accounting and regulatory laws such as VAT
- Outsource It- If you do not have a right person in your office, just outsource the book keeping function to the Accountants or a Book Keeping Agency. Ensure whoever you outsource to is proactive, completes your work in real time and provides you with management reporting information on timely basis
- Budget- Prepare a forecast, not in detail but overall, of what revenues you are targeting to achieve as well the costs that you are going to incur.
- Review- Make sure you maintain your books on a real time basis. Review the financials against the figures you have budgeted and forecasted
- Adjustments- Make any necessary adjustments to your business plan whether to marketing, range of products or services, etc to ensure your targeted revenue is achieved. Ensure your expenses are maintained below your budgeted figure.
- Analytics- Try to measure your business on Key Performance Indicators. If you are in retail business, some of the examples can be ‘what is your average revenue per customer? What is the footfall during morning, afternoon, evening and holidays? etc. Based on the analysis make any necessary changes to your business.
About the author
Sachin Lohade is a Chartered Accountant and works with SMEs in providing book keeping and management accounting services. He can be reached out at firstname.lastname@example.org or you can visit www.corientbs.com for further information.