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THE SME CHALLENGE-Are you ready?October 2011
Richard Keighley, director at e-FM Network, outlines the challenges facing SMEs in the country
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Over the coming months, small and medium sized businesses will be confronted with a fresh wave of challenges. Corporate financial analysts have warned that the worst is yet to come as previous experience has shown that it is not the recession that is most treacherous, it is the recovery.
SMEs in particular are more vulnerable to changes in economic activity, and survival could be more of an issue for them than thriving, as they struggle through these difficult times. Many companies have managed to make it through the recession but with hardly any reserves, and could very soon discover that they are unable to access the working capital that they need to survive.
The key factors necessary for survival and financing growth opportunities are access to and proper management of cash and working capital. Overall there have been many pressures that UK businesses have had to bear, from VAT increases, inflation and rising commodity costs to cuts in revenue, all of which may have depleted a companies reserves.
To avoid becoming a statistic, there are a few things management teams can do to cushion themselves. The ability to grow in the SME marketplace is dependent on the strength and depth of skills within every aspect of the business, with a focus on operational, financial and management capabilities. You should:
-Understand which of your products or services are making you money. This will help you focus your efforts on the most profitable aspect of your offering and could significantly increase your profits or diminish your losses.
-Enforce strict cost control procedures- reduce operating expenses, review credit policies and reassess credit terms.
-Review the performance of your business. From an operational point as well as a financial point. Management accounts and performance data can be a useful business planning tool that analyses your business and helps you make informed business decisions. Their usefulness should never be underestimated. If you don’t use these, find out who can produce them for you now as they can help improve the performance of the company.
-If you need funding, check alternative sources of finance. Review your existing debts and your ability to service any additional funding as this is of paramount importance to lenders. You may be pleasantly surprised to find you can raise money on assets you had not considered to have value. Do you have a good business plan?
-Master long-term planning, as this will enable you to stay focussed on the day-to-day operational challenges and fight routine pressure.
Sometimes you may need a fresh pair of eyes to look at business issues when dealing with a difficult decision or process. Obvious solutions can be missed by the present management team as they are sometimes too near to a problem. The most important point is this- seek timely advice when you spot red flags that you are unable to deal with as this could save your business.
Contact an experienced financial director for an informal discussion to see where they can help take on the challenges of the coming months and build your business into the successful operation you desire.
Contributed by Richard Keighley. RICHARD KEIGHLEY is Finance Director at e-FM Network. He can be contacted on 07845 671204 or email@example.com. You can also visit www.efm-network.com