The financial management capability of Irish SMEs varies significantly.
I have been working with many Irish SMEs over the past 20 years. During this period I was helping them to assess and improve their financial management capability. Over time, I have observed a number of different stages that businesses go through as they develop their skill levels. Therefore, I have set out in the table below the characteristics of the respective stages.
It is true that not every business goes through all the stages nor do they spend the same amount of time in each. However, a high potential business with external professional funding will usually prefer to put a high level of financial management capability in place from the start. In contrast, a startup that is growing organically will usually develop its financial management capability as the business grows.
Use the table to identify where you are and what you have to do to improve.
Levels of Financial Management Capability
Level |
Activities | Internal Outputs | External Outputs | Resources |
| Minimum | Business run from bank statements
Records sent to external accountant who does VAT, PAYE and prepares accounts at year-end |
None | VAT Returns, PAYE Returns, Annual
Accounts at year-end |
Clerical Staff |
| Book-keeping Basic | Record sales, purchases, payments, and receipts.
Payroll Calculations using payroll software. All files to the accountant at the year-end |
VAT Returns, PAYE Returns
Reasonably reliable customer, supplier, and bank records |
Annual Accounts at year-end | Book-keeper, not necessarily qualified |
| Bookkeeping Plus | As Bookkeeping Basic with
Checks and Verifications on the bank, supplier, and customer balances All files to the accountant at the year-end |
VAT Returns, PAYE Returns
Highly reliable customer, supplier, and bank records |
Annual Accounts at year-end | Usually qualified book-keeper with some experience could be a trainee accountant |
| Accounting Basic | As Bookkeeping Plus with
Management Accounts prepared at least quarterly incorporating accounting adjustments for stock, accruals and prepayments, depreciation |
VAT Returns, PAYE Returns
Highly reliable customer, supplier, and bank records |
Management Accounts (at least quarterly)
P&L, Balance Sheet, Customer Balances, Supplier Balances |
Usually qualified book-keeper with some experience could be a trainee accountant
Part-time controller for management accounts |
| Financial Control | As Accounting Basic with
Management Accounts reviewed with Senior Management Short term cash flow projections Annual Budgets prepared |
VAT Returns, PAYE Returns
Highly reliable customer, supplier, and bank records |
Reliable Budgets
Highly reliable management accounts Including Actual v Budget P&L |
Internal accounting staff with experience and some qualifications
Part-time controller for management accounts, budgets, and projections |
| Financial Control Plus | As Financial Control with
Product costings from budget data Short term cash flow projections Financial Projections updated quarterly |
VAT Returns, PAYE Returns
Highly reliable customer, supplier, and bank records Short term cash flow projections |
Highly reliable management accounts
Reliable Budgets and product costings Reliable projections Basic analysis of variances Financial inputs to decision making |
Internal accounting staff with experience and some qualifications
Part-time controller for management accounts, budgets, and decision inputs |
| Strategic Control | As Financial Control Plus
With multi year-long range planning Full Financial Evaluation of all key business decisions The robust financial model that can quickly support what-if evaluation of various options |
VAT Returns, PAYE Returns
Highly reliable customer, supplier, and bank records Short term cash flow projections |
Highly reliable management accounts
Reliable Budgets and product costings Reliable projections Basic analysis of variances Financial inputs to decision making Long term funding requirements identified with plans to address them |
Internal accounting staff with experience and some qualifications
Usually fulltime (but possibly Part-time) controller for management accounts, budgets, and long-range plans and for decision inputs |
What does this mean for you?
You should use the characteristics in the table to identify where you are now. Then, you should ask if this is sufficient for you and for your business. In addition to that, ask yourself if you have the appropriate skill levels to do what you need to do. This article here can help you make an informed decision.
Wherever you have gaps, you need to put a plan in place to fill them. Above all, the plan should identify what must be done, who will do it, and when will it be completed.
How I can help?
With many years of experience working with SMEs, I can help you complete your diagnosis and put improvement plans in place. In addition to that, I can coach your financial staff to grow into their roles. Furthermore, where necessary I can assist in hiring appropriate staff. I genuinely believe we can work together to create a practical plan to address the needs of your business.
Offer
I am offering a two-hour assessment of your financial management capability with no obligations on your part. This assessment will be restricted in that, I can only offer one per week.
Do you want to have your financial function assessed? Feel free to send me an email with the subject “Assessment of Financial Management Capability”.