A Strategic Finance Checklist for SME Leaders
Running an SME and managing strategic finance is a challenging task at the best of times. During a global pandemic, and with Brexit advancing at a rate of knots, it can feel overwhelming.
The immediate issues have to take priority, the day-to-day management of the business and staff,
the task of actually getting the goods and or services to the customer on time, at the right price and quality.
No wonder some of the other strategic finance considerations, the “nice to haves”, get left behind.
The problem is, those “nice to haves” are actually essential to the long term future of the business. It’s what keeps you ahead of the competition, makes you agile, able to exploit opportunities and mitigate risk.
The following list is some of the elements that an SME owner should have covered, but are easily overlooked, especially in times of crisis. If you’re missing out on any, don’t fret, we can help.
1) Long-term Strategic Planning
Do you regularly discuss where you want to be in 3-5 years time? Do you know how you will
get there? Are you constantly checking that you are on course to achieve your aims? What
do you do if you start to veer away from it? Do you have a long term plan? And is there a
plan B? Is your team fully bought into it?
In times of crisis, things move very quickly, scenario planning is key. You don’t just need a
plan B: you need a plan C, D and E. Any funder will expect a 2021 detailed plan. Cash
generation and retention is key, does your business plan include a detailed cashflow
forecast? Running out of cash is the biggest risk to SME in turbulent times.
Do you speak the same language as funding providers? It can sometimes sound quite
foreign, do you have a “native speaker” in your team.
How quickly can you move into other markets or products, do you understand where your
high growth potential is, and what risks are associated? Do you have a team working on new
product development? Do you have expertise in exporting? Could this help your growth?
You don’t just need a plan B: you need a plan C, D and E.
2) Risk & Mitigation
Very few could have foreseen the impact of COVID-19. However, a failure in the supply chain,
up or down, disruption in your market, the disintegration of your primary distribution channels
should be mitigated against, and a plan should have been in place.
There are risks inherent in all business that need to be understood and mitigated to the best
of your ability. A risk register should be maintained and regularly reviewed.
3) Horizon Scanning / Outward Facing
You may have a full understanding of your own business, but do you consider the changes
occurring in the wider business environment, what are your customers/competitors/
suppliers facing?
What threats are on the horizon, what opportunities might you be able to
exploit, what is the “next big thing” in your market? Is someone responsible for reporting on
this every month?
4) Corporate Governance
There is no legal requirement for SMEs to follow the UK Corporate Governance Code. However, there are huge benefits from having some corporate governance in place, ultimately it is there to protect shareholder value and reinforce the long term sustainability of the business.
5) Appraising Board Effectiveness
How do you ensure that your board is as effective as it could be? Agreement is important, but groupthink is dangerous. Strong leadership is positive, but not if that becomes a dictatorship.
Is there sufficient challenge around the board table and sufficient diversity of thinking? Do you have someone who is independent enough to review the board performance and suggest improvements?
Agreement is important, but groupthink is dangerous.
6) Financial Housekeeping
Is your balance sheet fit for investment? Does your board understand it’s financial statements? Are all the debts repayable, are there sufficient accruals to cover expected eventualities, (but not too much squirrelled away)? Is there anything that just requires a bit of attention to be absolutely correct?
7) Networking
Does your board get out and about in the local business community? Who do you turn to if you need assistance, or to bounce an idea off? Do you know the various funding providers (more importantly do they know you)?
Talking to other successful business people in other sectors can really help to fire new ideas,
spark new directions.
Do you know how to access these networks, do you have the time or resource to build these
relationships?
8) Knowledge Transfer / Succession Planning
What is the current owners’ exit strategy? What do those timescales look like? Is there a
funding requirement?
Planning early for an exit means that you can really get all the pieces in place to ensure the
optimal result. This includes getting the management teams buy-in and ensure that all the
required knowledge is passed to those remaining with the business.
9) Support
Running a business can be lonely, having someone independent to run ideas past, chew the
fat and to act as a sounding board is really important to help craft ideas and strategies, it can
be invaluable to mental health.
If you’re confident you have each of these considerations covered, well done, you’re ahead of the game. Just keep making sure that distractions aren’t taking you off course.
If you or your board are missing any of these strategic finance essentials, we can help, by working with you to evaluate where you’re at and set in place an actionable plan to move forward.
Get in touch to find out more.
Vickie Brown is a Chartered Director, professional accountant, and experienced NED, with over 25 years of know-how gained in manufacturing and FMCG businesses throughout the region. A Consulting Partner at Inclusive Consulting, Vickie assists businesses in Finance and Strategy.
