Last year over 600,000 businesses were set-up in the UK. Even with conservative estimate, nearly half of them will not see 5th anniversary and many will not even survive first 12 months. There are lots of reasons cited for this but one that comes across quite often is around financials. It ranges from failure to understand profitability, running out of cash, over-trading or failing to take necessary action when numbers go red.
Although profitability is a simple function of revenue less costs, in reality it is hard for businesses to understand this. Sitting inventory, work in progress, debt write offs are some of the things that can affect the bottom line and turn a seemingly good business close its doors to new customers.
Dynamics of doing business have long changed. Gone are the days where profitability was once a year exercise that your accountant would do as part of compliance exercise. In today’s fast pacing environment, businesses need real time information on the move to help them take informed business decisions and being aware of financial consequences of those decisions. They need early signs of things changing so they can act in timely manner before the issue becomes fatal.
This is where the role of accountants changes from a once a year engagement to an ongoing business partnership that helps business owners keep track on key financials through periodic easy to understand financial conversations. Businesses need to change their relationship to numbers from a task that the accountant will take care off to an integral piece of information at their disposal which might as well help them see their business survive for year five and beyond.
At SigmaTen, we work with our clients helping them set-up a technology platform that can deliver quality financial management information periodically for businesses to stay on top of their finances. We are working hard so the numbers make #FinancialSense.