ACCA says that the development of the finance function is ‘a cause, not a consequence’ of SME growth

Small businesses applying for new funding are more likely to be successful if they have financially trained staff in charge of their finances, the latest edition of the quarterly SME Finance Monitor, produced by independent researchers BDRC Continental has revealed.

Brian McGuire, ACCA Ulster Members Network, welcomes the findings, saying: ‘It’s great to finally have the most robust evidence possible that developing a professional finance function makes it easier for SMEs to access the finance they need. This is something we’ve been advocating for many years.”

The Monitor is the definitive account of UK SMEs’ access to finance and with four waves of the survey now complete, and with more than 20,000 interviews with decision-makers in UK SMEs, it highlights the influences on bank and business behaviour. The SME Finance Monitor revealed that in addition to the use of financially trained staff to head up the finance function, producing regular management accounts helped SMEs access new funding. On the basis of the first three waves of Monitor data, ACCA’s analysis of the data estimates that over one-third (34%) of all businesses with 1 to 9 employees have neither of these practices in place, while less than one in five (19%) have both.

Larger businesses and businesses with better external credit ratings were more likely to get new credit facilities. However, SMEs were also more likely to succeed in their applications if they had managed to avoid major credit and cashflow issues - such as missing a loan payment, and if they and / or their owners had a track record of at least a year (owner-managers with over 15 years’ experience got a further bonus), and if they were not in the hotel and restaurant business.

ACCA has echoed this sentiment previously in a report called Driving SME growth through an evolving finance function. This report drew on the first two waves of the Monitor in order to explain how and why businesses develop finance functions as they grow. This research found that SMEs with a combination of formal business plans, regular management reporting and professionally trained staff were more likely to achieve fast growth without compromising their credit scores. This effect remained significant even after turnover and headcount were taken into account.

Brian McGuire explains: “ACCA’s argument, based on careful modelling of the Finance Monitoring data, is that the development of the finance function is ‘a cause, not a consequence’ of SME growth. It begins as a tool for business planning pre-start up, then evolves into a set of rudimentary financial and management controls that align owner and staff incentives, then refocuses on enabling standardisation and monitoring of business processes.

“At the final stage of its development, an SME finance function adapts to the need for responsive growth by enabling businesses to access finance, assess the case for new products and services, monitor their supply chains and manage their headcount.”

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For more information, please contact Shane Finnegan on 028 9066 3000

Notes to Editors

1. ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.2. We support our 154,000 members and 432,000 students in 170 countries and 20,000 students and members in Ireland, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of over 80 offices and centres and more than 8,400 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.3. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.