Why financial information matters when it comes to running your business

business success

In today’s challenging economic environment, small businesses must be prepared to navigate potential financial and logistical challenges. As accountants, we bring a wealth of expertise and can play a crucial role in ensuring your business success by reminding you why financial information matters when it comes to running your business.

Last year, 25,158 corporate insolvencies occurred, marking the highest level in 30 years. This represented a 14% increase from the previous year. Furthermore, the June 2024 statistics continue to show a worrisome increase.

Numerous financial experts believe that the increase in insolvencies signifies a period of recovery following the pandemic. During that time, rent was covered, furlough supported employees’ salaries, and bounce-back loans were available, in addition to other forms of financial support.

Since then, businesses have been left to handle ongoing wage inflation, rising prices, and labour shortages on their own, causing many to struggle and try to survive. Is this you? As a small business owner, you could probably use help right now.  Getting great support will be the foundation from which your business can flourish.

You may hesitate to seek help due to feelings of pride.  That’s understandable.  After all, you’ve invested so much time, energy, and money into your business. It can be challenging to come to terms with the fact that it may not have worked out as planned.

It’s also common for many business owners to not fully grasp the true extent of their financial challenges.  That’s okay, too, because, after all, you didn’t go into business to be great at accounts and financial data. This is why it is always best to seek help, which comes without judgment, making you feel understood and less alone in your financial struggles.

Help from professionals who can help you understand why financial information matters when it comes to running your business is not just beneficial, it’s vital.  Professionals like accountants who can spot the warning signs of insolvency are crucial in these challenging times.

Financial fundamentals

Managing the cash flow and balance sheet of a business is essential for maintaining financial stability.

The terms “cash flow” and “balance sheet” may seem complex to those outside the financial world, but accountants play a crucial role in simplifying and explaining these concepts in easily understandable ways.

  • The cash flow statement tells you as a business owner if you have enough money coming in to pay your bills.
  • The balance sheet tells you what you own and are owed, versus what you owe in the short and long term – so, the overall health of the business.
  • To reach that healthy position, accountants review a business’s profit or loss i.e. the profit and loss account. This indicates whether the goods or services that you are selling are making you any money.

We totally understand the challenges that small businesses face with their finances. Statistics show that more than a third (34%) of new businesses cease trading by the end of the second year, and this number increases to half (50%) by the end of the third year. This is why working with a supportive partner in your accountant can help.

Regularly reviewing and understanding your financial information matters when it comes to running your business.

In the early stages of a business, when money is tight and there isn’t much room for flexibility, even a 1% difference in repayment interest rates, say, on a start-up loan can significantly impact your ability to manage expenses, sustain your business, and meet your financial obligations to suppliers.

When dealing with limited funds, even slight fluctuations in percentages can have a significant impact.

We believe that accountants play a significant role in the financial success of small and medium-sized enterprises (SMEs). It is our responsibility to establish a relationship of trust with the owner so that they are comfortable sharing their complete financial situation with us.

We serve as a second set of eyes, capable of identifying potential financial crises that may arise in the near future, whether it’s in one, two, three, or four months’ time.

What next?

We’re as serious about your ambitions as you are, and we’re here to help you get back on track.

Everything we do is in pursuit of you achieving your ambitions. As you grow and meet your goals, we’ll continue to ask, “What’s next?” and use future planning tools to plan for the significant future decisions—grow, replicate, and sell.

If you are an existing client and want to have a serious conversation about your future ambitions, please email your normal manager.

If you are not yet working with us, here’s more about how we work.