I have worked with SME businesses for over a decade now, and if there's one thing all successful businesses have in common, it is a passionate, driven, nurturing head of the business. An owner/CEO without these qualities loses talent and can stagnate the company, losing market share to competitors. The CEO that cares will continually drive growth & develop their staff.
From a financial point of view, cash flow is by far the biggest concern for SMEs. SMEs are often new businesses and do not have access to quick finance, unlike larger companies. Having a cash flow forecast is absolutely vital to the business's success and allows the CEO to be in control of the finances.
What is a cash flow forecast?
A cash flow forecast is effectively a budget of incoming and outgoing cash for a business, usually over the financial year. It is created by forecasting the income and expenditure of a company (a profit and loss) along with capital expenditure and expected funding. A lot of SMEs underestimate the power of a budget, only putting them together to raise investment. However, the budget firstly gets everything out of the headspace of the owner and senior members of the business and onto paper, setting clear goals for the company. It allows the business to allocate resources effectively, knowing exactly what it can and cannot afford. Reviewing the forecast against actual financial achievement highlights variances, which can be addressed to ensure the business achieves its targets.
Much like all business areas, the key to success for finance in the SME is to have quality people- motivated by an effective leadership team who have an awareness of key financial KPIs.
