For businesses with an eye on fast growth, the government’s new Growth Vouchers scheme is offering unbridled support, says Clive Lewis, head of enterprise at the ICAEW
Small firms that take advice are more likely to grow, but the current marketplace is failing as firms are often reluctant to pay for a service they haven’t tried. Staggeringly, about half a million small businesses have never taken any advice. Only 45% of SME employers sought external information or advice in the last year, representing a 49% drop since 2010. A large part of the problem is that advice-seeking is often triggered by business problems and crises rather than positive intentions of growth. Indeed, only one in seven SME employers have used strategic advice in the last three years.
The Growth Vouchers scheme – launched by the government earlier this year – looks to address this by supporting the creation of a new marketplace so that SMEs can see the value in seeking professional external advice. Under the scheme, some businesses will be randomly chosen as the recipient of a voucher worth up to £2,000 to help finance specialist business support.
How does the Growth Vouchers scheme work?
Businesses in need of advice can apply on the gov.uk website. Eligible businesses must be registered in England, have fewer than 50 employees, been in existence for at least a year and cannot have sought strategic business advice previously. Not all eligible businesses will receive a voucher and those that do will be signposted to the online marketplace where they can search for qualified professional advisers. Businesses that don’t receive a voucher can still access the marketplace to look for an adviser.
What advice is included in the scheme?
Many firms offer advice on accessing finance and cashflow management and this specialism is probably the area where most accountants will be involved. The services covered under this heading include:
A financial healthcheck – a review of the financial health of the business and developing a strategy for growth. This might include trends in revenue and gross margin by product or service, overheads and profitability and working capital management.
Financial planning, creditworthiness and investment-readiness – what types of short, medium and long-term finance best suit the business. Developing a strong business plan to aid raising debt or equity finance.
Cashflow and credit management – developing a robust cashflow forecasting system and professional credit management processes, including assessing trading terms and the processes for following up on late-paying customers.
Assistance with the preparation of a compelling business plan to attract equity investors – this should include the all-important executive summary, financial forecasts, market and competitor analysis, marketing and sales plans and identifying potential investors.
Strategic management accounting – developing a comprehensive management information system to meet the needs of the business, providing timely and relevant information.
Who are the small businesses likely to be?
The businesses will be post start-up businesses who have survived and are now seeking to grow. Figures from the Office for National Statistics show that 7% of VAT-registered businesses fail in the first year but by year five that figure increases to 55%. So the period from the beginning of year two to the end of year five sees almost half of VAT-registered businesses ceasing. Many of these closures result from inadequate financial management, an area where accountants are well placed to help.
You can find out more about the Growth Vouchers scheme by visiting gov.uk/apply-growth-vouchers