ACCA - The global body for professional accountants
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-startup, 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.
—Manos Schizas, senior SME policy adviser, ACCA

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.

Manos Schizas, senior SME policy adviser at ACCA, 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. We’ve been saying this for years, but then we would, wouldn’t we?’

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.

ACCA’s analysis of the data reveals that producing regular management accounts helped SMEs access new funding. On the basis of the first three waves of Monitor data, ACCA 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 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.

Manos Schizas 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-startup, 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.'

  • The latest edition of the SME Finance Monitor, and ACCA's report 'Driving SME growth through an evolving finance function' can be found from the 'Related Links' section, to the left of this article