Tax & admin · 17 November 2016

British entrepreneurs aren’t naturally numbers based, but they need to be

British entrepreneurs planning
Get your numbers in order ahead of time

The Autumn Statement and Budget announcements given by the chancellor are all about the financial infrastructure that supports and powers the British economy, so are a must follow for any switched on business leader.

However, while the subtle elements of corporation tax or relief rates are often hard to get excited about, Bivek Sharma is firm in his belief that a firm understanding of your cash flow, debt exposure and funding needs are what separates British entrepreneurs that fail in the early years with those that go on and prosper.

Sharma is the head of KPMG Small Business Accounting, a division set up to cater for the burgeoning SME community in the UK. It was driven by a belief that too many were relying on outdated accounting practices that produced financial information so out of date it was almost useless.

“If you look at the market the majority still hasn’t changed. Many businesses are over reliant on manual processes, big lever arch files. It’s all a bit un-reactive and limited,” he added.

“I used to run my own business, so I know all about the issues associated. I’ve been through that process of pulling together paperwork and handing it over to an accountant way after the year had finished – none of which helped me or my business with financing or exit planning.”

KPMG Small Business Accounting is all about providing timely information to British entrepreneurs, so businesses can understand their cash flow situation. Think of it as a virtual finance professional  powering smarter decisions – overlaying technology to make that quick and easy. The UK has a notoriously high fail rate according to commercial insurer RSA, with more than half not making it beyond five years, so this kind of guidance can be golden.

Sharma thinks this failure rate isn’t because someone ploughed on with a bad idea, but more often than not that they simply ran out of cash and didn’t have the time to sort it out. “You get stuck in the day-to-day, losing sight of the financials, and then realise suddenly you need working capital. But by then it is too late,” he explained.

The entrepreneur turned intrapreneur, as he calls himself, sees KPMG Small Business Accounting as a provider giving the gold star service to British entrepreneurs that is normally the luxury of bigger corporates.

Since setting up the offering 18 months ago, Sharma and the team have come to the conclusion it is better to focus on a few mission-critical elements of the business success formula. It’s about the “really need” rather than the “nice to haves”. First off are issues such as an entrepreneur making sure they are compliant, then knowing how they are performing every month. After that comes the need to have early warnings about cash flow, implementing “cool, clever and quick” ways of getting this all done.

All of the alliance firms KPMG Small Business Accounting has joined up with integrate seamlessly with the its online platform, meaning clients only have to use one system to manage all important dashboards.

Ahead of the Autumn Statement 2016 address being given by Hammond on 23 November, Sharma was keen to explain what the common problems he and the team frequently come across. Whereas the government takes more of a focusing creating a tax-friendly environment for business creation, it is often more of an education and planning set of issues influencing business survival.

“The more entrepreneurial they are, they less inclined they can be to rely on numbers, which sometimes can get them into trouble,” he said. “With a creative outlook, they often just want to speed up and invest quickly without knowing what the cash flow situation is like. Going hell for leather in the first three months and then having to constantly fundraise can put investors off – as they won’t think you’re particularly good with cash.

“The other thing we’ve seen is people with great ideas finding it hard to scale up and appeal to a mass market. As a small firm owner, they need to know the best way of marketing products, but that can be quite hard with little money for big campaigns.”

So what are the keys to survival? First off, have a solid plan. The best clients Sharma has come across during his time with KPMG Small Business Accounting are those who have spent hours putting together a huge spreadsheet including every possible cost and revenue permutation they can imagine. While he is quick to transition them onto a faster way of planning and reporting, it shows they have thought through what they’re doing. Plans are rarely stuck to, but having invested a lot of time on when, how and who sets the direction of travel and milestones.

The other key thing to cover is a good level of market research. Surrounding yourself with the opinions of friends and family, who are often ‘yes’ men and women, does little to validate a product or service, he urged. “Be honest with yourself. You need to know what the competition is, the best price point and effective marketing.

“Have you kicked the tires, done market testing and identified an idea customer base? Then get into the habit of robust accounting. Some just think they can get away with doing it on the weekend, but that’s a terrible idea. Hand it all over to an accountant to do the reporting and compliance, as that’s 10-20 per cent of your time that can be spent on making the business a success instead.”

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Hunter Ruthven was previously editor of Business Advice. He was also the editor of Real Business, the UK's most-read website for entrepreneurs and business leaders at the helm of growing SMEs.

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