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”.

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