Growing a business – An accountant’s guide

For all start-up businesses, the dream is to grow – but statistics show that the failure rate for firms in the early years is high. The support of an accountant for growing business can make all the difference in the early days, as they can offer their experience to guide firms in their infancy.

Can a business grow too fast?

Official statistics show that only 38.4% of businesses set up nationwide in 2019 survived for at least five years – with only 30.6% of firms set up in the West Midlands making it to the five year mark. It shows that, for various reasons, often businesses do not survive beyond these initial years.

One of the reasons for this can be growing too fast, and the financial pressures associated with this.

So, if you’re looking to grow a business, it’s important to be aware of its current and forecasted cash flow position, to avoid overtrading or running out of finance.

Growth which is too much, too soon can lead to overtrading. For example, if a business invests heavily in stock to turn into sales and the sales don’t come quickly enough, this can quickly create problems – which is why cash flow management is vital.

Building best practice approaches in to your business, such as invoicing promptly, monitoring your stock levels and being aware of your cash flow, will pay off as you work to scale your business up.

Growing a small business – cash flow forecasting

Founders of small businesses will generally be busy taking care of the here and now – speaking with clients, securing contracts and keeping the business moving. They may not have the opportunity to think about what comes next and they may not have their eye on the financial position of the company.

That’s where working with experienced accountants for growing businesses like us can help. We have worked with companies in various sectors over many years which were all in the same position. By working together, we were able to help them become sustainable as they scaled their businesses up.

A sustainable business can be a desirable candidate for finance, and so keeping your business in good financial health is helpful if you need to access further finance as you look to expand.

A key starting point for growing a business is to build out a cash flow forecast. Having this in place will help you to make good financial decisions and provide evidence that you can service any finance which you need to access. It will also be a key tool to show to potential investors if you decide to raise further finance through that route.

When we create a cash flow forecast, we work with a client to understand the data which needs to go into it. When the forecast is live, we can help them to identify where the pinch points are for their cash flow and to work out how they are going to manage that. This may mean seeking more finance, or they may consider invoice discounting – these are measures which could help in the short term.

How can accounting help a business grow further?

As a start-up business, you may wish to take care of day-to-day accounting tasks such as sending invoices and chasing payments yourself until the business scales up further.

As experienced accountants for growing businesses, our advice would be to invest in accounting software and learn how to use it to its full potential to support your business and its growth. One way we support businesses with this is by working with them to help set up the accounting software and training them on how to use it to make sure they’re getting the most out of it.

In time, you may wish to pass the everyday accounting tasks on to an accountant, as this will free up more time for you to run and grow the business. We have worked with many businesses which have scaled up quickly and then asked us to take on all of the internal data processing, invoice processing and reconciling internal finances on their behalf.

As accountants for growing businesses, we’re here to help

At Prime Accountants Group, we work with businesses in various sectors who are based across the UK to help them grow. Speak to us for expert advice on your growth plans.