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By Priya Raja Motala
New Business & Digital Transformation
Posted on: 27 November 2019

Getting Paid Faster - Who Would Not Like That?

Cash is King or rather Cash-Flow is King

Ask any small business owner what is the one issue that concerns them most and you are most likely to get the answer “cash-flow”.

In fact, the Federation of Small Business estimates that 50,000 small businesses are failing each year in the UK due to cash flow issues.

Small Businesses in the UK are owed on average £131 billion by customers who are always paying late and UK small to medium sized businesses (SMEs) have seen debt due to late payments almost double in the last year.

Some 75% of SMEs are being kept waiting for a month or longer after the agreed due date before being paid while about 45% are being kept waiting for 60 days or more.

Paul Horlock, Pay.UK CEO, said: ‘It is concerning that so many smaller businesses are struggling because of late payments in 2019, especially as there are so many ways, they can now get paid.  Offering customers a choice of payment or automated options can help remove barriers to make sure a bill is settled on time.

What can be done ?

Small Businesses have plenty to juggle each day to run their business and they are unlikely to have a dedicated internal finance team to look after the cash side.  So being concerned daily about money coming in puts unnecessary stress.

There is always the fear that a good business with a very viable plan and fantastic future will run out cash if not managed properly.

By partnering with a cloud accounting software provider such as QuickBooks or Xero and then adding on Apps like Go Cardless and Chaser, accountants can now develop a seamless system for small business to get their cash in quicker. 

The simple features offered by the accounting systems and Apps are not only very affordable but will significantly reduce the stresses experienced by Small Business owners as technology will save time.

When working with their accountant, a business owner should have a well implemented internal system so to

  • Control the cash-flow
  • Not to have to spend time chasing payments as these are automated. 
  • Collection of bills owed to you is automated via direct debit.  This is driven from the accounting software

Technology has come on by leaps and bounds over the last few years allowing access for Small Business to some precious resources previously only available to the “big boys” but are now available to all if you know where to look for it.

 Why is it so much simpler now ?

Over the last few years since the early adoption of “real time” accounting has meant sitting in meetings with clients and looking at their cash position is altogether a different story.

This is because thanks to the use of “cloud accounting”, bookkeeping is now being done more promptly (ideally daily but if not weekly) and therefore the raw data is easily available.

Data is also easily shared between the business owner and the accountant without hassle of taking back-up’s and uploading from clunky desktop software.

There is automatic linking of your bank accounts to your accounting software which ensures you are always looking at the up to date information plus better syncing of Apps is a big juicy bonus

When I first started working in the industry almost 25 years ago, I would literally spend hours inputting figures onto extensive spreadsheets. 

In the case of creating a cash-flow budget and forecast, the figures will be based on history plus having lengthy detailed conversations with the client. This would involve devoting long hours from both sides.  So, all in all an expensive exercise.

After that I would double, and triple check the formulas for errors and then perhaps even involve a colleague.

How things have moved on, looking at a cash flow forecast now would involve:

  •  Review the financial data in the cloud accounting software ensuring data in the software is reconciled which is very visible
  •  Sync data to a cash flow management software which is intelligent enough to predict patterns of say when your customer pays you rather than just the due date of an invoice.
  • Improving the initial output from the cash flow management system and developing an action plan with the client.
  • Result of consultation with client may include implementation of a direct debit system to speed up the process of cash collection or a credit control solution
  • Potentially source these short-term finance solutions relatively promptly as we have the up to date financial data
  • Agreeing a date for the next contact - telephone/ Skype or face to face meeting

Deep Understanding of Your Business is now my business

So, truth be told, I now spend most of my time talking. Business related of course.

I do not spend time data entering (in fact none of the team does).  Instead I will meet with and or call the client having spent time understanding their business deeply including looking at factors which are causing the cash flow issues in the first place.

Our team are the internal finance team for our clients. That most powerful of resource which was until recently only available to businesses with deep pockets.

The visibility of the financial data has helped accountants such as us deliver a completely different level of service.

I am looking forward to the new decade, which I predict will only get better. Where we get the opportunity to work closely with SME’s in the daily lives of their businesses. 

To be given the opportunity to work with and help these businesses to thrive and not just survive.

After all it is our Small Businesses which keep our economy moving.

Priya Raja Motala
New Business & Digital Transformation

Priya leads our New Business and Onboarding team.  She will have the initial meeting with all new clients wanting to work with Myers Clark. Her experience in advising owner-managed businesses on their management accounting, bookkeeping, VAT