Finance for SMEs

Stephen Hill stephen@fd4.co.uk

FD4

• FD4 is a team of experienced finance directors who work on a part time basis for a number of companies in the £2m to £40m turnover range.

• They are very experienced Finance Directors who know what success looks like and have held leadership positions in companies with £100m+ turnover.

• FD4 finance directors have worked in arrange of business sectors including Consumer Goods, Logistics, Care Homes, Financial Services, Franchising, Trade Associations, Aerospace and Defence, Recruitment Services, Bio Pharmaceuticals, Digital/Gaming, Building facilities.

• The team extends to trusted partners with whom we have lasting relationships: -

Accounting Firms, Lawyers, Web & Digital Marketing professionals, IFAs, Banking and Finance Providers, Tax Advisers, Insolvency Practitioners, HR Service providers.

What is an SME?

Employees Turnover Assets

UK (Companies Act 2006)

<250 <£25.9m <£12.9m

Europe (2003/361/EC) <250 <€50m <€43m

Generally 2 out of 3 conditions to be met

What is an SME?

Better definition?

Companies that are generally:SmartMotivatedEnergetic

Financial challenges for SMEs

What are the CORE financial challenges that SMEs face?

Financial challenges for SMEs

What are the CORE financial challenges that SMEs face?

Cash flow OrganisationRestructuring Exit planning

Cash flow

90% of small business failures are caused by poor cash flow. Dun & Bradstreet

SMEs failing due to cash flow issues - estimated that 80% of business failures were down to poor cash flow. Simply Cashflow Limited

Cash flow

What does cash flow mean for recruiters?

Invoice discounting T&CsAdvance %Concentration limitsAged debt and credit controlPay when paid clausesBilling frequency/self bill

Cash flow

What does cash flow mean for recruiters?

Other funding arrangementsPayment terms to contractorsPerm vs ContractContract margin % and net profit %

Organisation

The financial aspects of organising people, processes and systems

Organisation

PeopleReward schemes - short, medium and long termCareer planning and OTE

Organisation

ProcessesFront office – data validation and contractsAccounting operations - in-house vs outsourceMonthly profit reportingBudgeting and forecasting

Organisation

SystemsFront, middle and back office

Restructuring

Changing the size and shape of the business over time

Restructuring

Growth through expansionNew teamNew officeNew country

Restructuring

AcquisitionsStrategic planIdentification of target/use of brokerDue diligenceExecution

Restructuring

DownsizingRedeployment/redundancy

Exit Planning

The when and how of selling the business

Trade salePE involvementMBO/MBI

Summary

• SMEs by their very nature change rapidly and this is particularly true in the recruitment sector

• Finance must be on top of these changes, balancing short term and longer term needs

• Remember the CORE financial challenges - Cash flow, Organisation, Restructuring and Exit Planning

Any questions?

Stephen Hill stephen@fd4.co.uk