INSPIRE Financial Management has been advising owner-managed businesses about financial management in the North East region for more than eight years.
In doing so we have benefited from a significant insight into the levels of skill within the region’s SMEs, particularly with regard to finance, our area of expertise.
We have carried out training and development with many businesses in the region over the years. Whether structured or unstructured, skill levels and training needs have always been delivered with three distinct levels of expertise in mind.
This may be useful for you in your business when considering whether you have the relevant skills. The three levels are operational, control and strategic.
Virtually every business, to be successful, must have expertise to a larger or lesser degree at each of these levels.
Some skills can be outsourced, some bought in and some internally developed or recruited.
At the operational level, the main skill requirements centre on the ability to record business information coherently and accurately on a timely basis. This would cover the recording of transactions, salary processing and basic exception reporting (for example analysing overdue debtors).
Without sound information being recorded then it is difficult to take things any further.
These skills can be developed internally or cost-effectively outsourced if necessary.
The next level is control – at this level it requires expertise to take the information prepared at operational level and to analyse and interpret this information to make it useful for decision-making.
The key to making good decisions is having as much relevant and accurate information available to you as possible.
This would include up-to-date financial results, short-term cash flow forecasts and financial forecasts for the medium term – perhaps 12 to 24 months.
A number of SMEs buy in expertise at this level to ensure that effective decisions are made, however, there are a significant number that don’t. Imagine driving your car with your eyes closed – that’s how some businesses are driven every day.
One fundamental aspect where we often see a lack of skill is within the operation of effective cash flow management particularly within SMEs.
Understanding, articulating and planning cash flow is the most fundamental business skill outside of the main income-generating skills of the business. No business can survive if starved of cash.
The ultimate and most important level of expertise is of course the strategic level.
While a number of skills can be outsourced or bought in, strategy must be developed and carried out by the business owners. Advisers and mentors can help but the ownership and delivery of the business strategy rests with the business owners or managers.
Skills to complement strategy can be bought in to help deliver it but the underlying drive and persistence of the owner is of prime importance.
We recognise that you have a passion for your business and use your own sector knowledge and expertise to drive it forward.
No one expects you to be a qualified accountant but we would urge you to review the financial skills within your own businesses at each level and aim to identify any shortfalls.
The sooner they are identified and the gaps filled then the better your business will run and hopefully the more profitable it will be – we can of course assist with this process as part of our free Business and Taxation Efficiency Review.
Richard Tait and Mike McKenna are directors of Inspire Financial Management
One fundamental aspect where we often see a lack of skill is within the operation of effective cash flow
Imagine driving your car with your eyes closed – that’s how some businesses are driven everyday