Iwoca SME Research Report – Accountants and the frontier of finance

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Stuart Hurst delves deep into the iwoca 2019 SME Research Report shares his thoughts on the research findings and how as accountants we match this with the advice we offer to clients.   

Why are accountants important when having conversations around finance?  

The rules of the game are changing, and that change has accelerated in the past four or five years. Even over the last twelve months, we have realised the value and impact that offering more financial advice gives our clients. It’s another layer of service, and having live data is pushing that change forward.  

Accountants have always been thought of as trusted advisors to business, but in the past this was reactive. You would uncover problems once or twice a year when you made contact with your client and saw their books. Today, thanks to the greater use of live data and more ways of staying in contact, we can have a much more reactive role.  

Now we are seeing their data live, we can ask the right kind of questions, at the right time to make a difference. We can see the changes and opportunities that are coming in advance. That includes matching needs like capital outlay for equipment with the right kind of finance; live data and regular contact lets us see the need coming and guide clients to the best finance for them.  

Ouriwoca’sresearch found that lack of finance was a problem for 20.8% of businesses. Do you feel this reflects your experience?   

Cash flow has always been a bane for businesses. Our data shows that the real figures for this would be closer to 50%: the real problem is that most businesses with cash flow problems don’t know they have a problem until it’s too late. In traditional accounting, the numbers would only be seen too late; we find that by switching to cloud-based accounting, our clients can grasp that they have a problem, take action sooner, and in a targeted way.  

Our research also found that late invoice payments are a problem for 19.3% of businesses. How can accountants identify these issues? 

My advice is always: don’t bury your head in the sand. You have to face up to it. You do that by getting the best data. Make sure your systems are as live as they can be, so you can keep on top of payments. The saying is ‘polite persistence pays.’ That’s certainly true today, and technology can help you. Chaser is one credit-control software service that helps by automating that first step of chasing payments for you. Chasing payments can be awkward and feel difficult, so getting a programme that can automate this part of your business is a good step to take. There are also other ways to help with invoice financing, to bridge the gap, but you need to be aware of it—again, access to live data is key.  

Uncertainty and Stress are the worst aspects of cash flow problems, according to 37.3% of our respondents. And 30.2% said that good finance helps reduce anxiety. How have you seen this manifest itself in businesses you work with? 

I firmly believe that accountants change lives. We help people sleep at night, and we give them time back to spend with the people they care about. So a good accountant has a massive impact on your wellbeing. I’ve seen it happen again and again: people coming in with huge anxiety levels, which are reduced as soon as we get them on a better system. For a business owner, knowledge is the secret to improving mental health.  

Our research found that 22.8% use finance to help operate at full capacity and 19.2% use it to grow faster. From an accountant’s perspective, what advice would you give a business trying to operate at full capacity, and/or grow? 

Better access to finance has been a real game-changer for clients. It’s overtrading that sometimes kills people off: they can’t fulfil the business needs fast enough. But if you’re switched on about getting finance, you can manage this. With the way that finance is going, you can get a phenomenally quick decision and access to the money. Businesses can work in the here and now, which is a reflection of the way that their customers expect to be served. They expect the instant purchase and the instant sale: the iwocas of this world are fulfilling this need.  

Some 65.9% of our respondents had accessed finance through banks. Of those, 10.9% say it was somewhat difficult, and 5.1% said it was very difficult. Does this reflect your experience with clients accessing finance with traditional banks?  

I’d say our figures for people having problems with high street bank finance would be higher. A lot depends on your local bank manager or relationship manager. If you can rely on them, they may be able to take action for you more quickly. But banks have such legacy systems. I know that many are inputting your data four or five times, into different systems that aren’t connected. With the new lenders that are coming along, such as iwoca, the process is connected, and more automated: they only need to use one system, make one submission. You get the rapid response that you need to act in the here and now.  

Even though many businesses have faced problems with accessing finance through high street banks, only 5.8% would turn to an online challenger. Why do you think this is?  

A great deal of this comes down to perceptions. Online companies aren’t as tangible as a bank, which has history and bricks and mortar presence. It’s also partly generational. My team here probably spend seven or eight hours a day using their smartphones; this is a generation that has a different perception of what finance can look like.  

This issue of perception is one that we can help overcome as accountants. Because we have such a trust relationship with clients, they know that we only recommend contacts that share that trust. I do think we’re at a tipping point with online finance providers now; its more about how people come to it, and finding the right solution from a provider that’s trusted and recommended.  

For more information please contact Stuart Hurst- s.hurst@uhy-uk.com  

Download the Accountants and finance: SME research report here- https://www.accountingweb.co.uk/resources/accountants-and-finance-sme-research-report-2019  

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