Advisory

Recap: How to cement yourself as the trusted advisor to your clients amid an economic downturn and an ever-changing SME lending landscape

13 Oct 2022

On 21 September 2022, our Head of Commercial, Thomas Boyd hosted a live discussion in conjunction with the Institute of Financial Accountants (IFA) to discuss the role of Advisor to SMEs as they navigate their business through the economic downturn. The panellists also discussed how business advisors can utilise technology to help their clients prepare, scale and grow their business.

Recap: How to cement yourself as the trusted advisor to your clients amid an economic downturn and an ever-changing SME lending landscape

Joining Thomas Boyd on the panel were Joanna Drinkwater, Chief Executive Officer and Head of Advisory at Grant McKnight; Izzi Rosenberg, Chartered Accountant at Harris Rosenberg, and Steve Darnell of VFD Pro – a training platform for accountancy practices

Key challenges faced by SMEs in today’s economic climate

In a recent survey, Funding Options asked 1,000 SME owners what their three most significant cost pressures will be over the next six months. 39% of respondents cited interest rates as their biggest cost pressure, 36% said supplier costs would be a big challenge, and 34% selected energy prices as a key contributor to the cost crisis. 

In the webinar, Jo, Izzy and Steve discussed some additional cost pressures that their own clients are facing at the moment. Alongside interest rates, supplier costs and energy prices, businesses are continuing to grapple with the following challenges:

  • Supply chain issues

  • Transportation delays due to war and Brexit

  • Wage pressure

  • Talent recruitment and retention

  • Credit rating affecting ability to access finance

At a time when there’s more demand for accountancy and advisory services, Steve, whose clients are accountants, explains that a lack of access to talent is putting pressure on the accounting industry as a whole. You can watch the webinar in full here:

Current SME lending market – what’s changed?

SMEs, including those who aren’t able to access business bank overdraft extensions and loans, are looking at a wider range of options – including equity as well as debt finance. 

In terms of the types of business finance that SMEs are exploring, Jo has noticed an appetite among some for invoice factoring. This is where a business ‘sells’ some or all of its outstanding invoices to an invoice factoring company, in order to improve its cash flow.

The factoring company pays the majority (usually 80-90%) of the invoices’ value immediately before collecting payment from the business’ customers. When the customers pay in full, the factoring company pays the rest to the business, minus their own fee.

Invoice discounting is similar to invoice factoring. 

The main difference is that the customer continues to pay the business as normal, and the business retains control over its sales ledger and collections process.

Why advisory services are more important than ever

At Funding Options, we also polled our accountant partners, focusing on how the relationship with their clients is evolving amid the current economic climate. 

  • 56% of respondents said they now actively source SME finance for their clients.

  • 22% said clients are in ‘survival mode’ and they’re helping them ‘keep the lights on’. 

  • 0% of Funding Options’ accountant partners are focusing solely on compliance tasks. 

The role of the accountant in today’s precarious economic landscape is about so much more than compliance alone. Of course, compliance is still an important part of the job, but so is advisory. Jo and Izzy’s accountancy firms both offer advisory services. 

“In essence, we don’t just do your standard end of year client review meetings – ‘here’s what you did a year ago’,” says Jo. “We sit down with our clients, we listen to their worries, their needs, their immediate problems, and we try to resolve those with advisory services.”

Jo is seeing a particular need among SMEs for the following:

  • Funding application support

  • Business plans

  • Cash flow forecasts

  • Helping clients manage their cash flow

“People are coming to us and they’re not just seeing us as their accountant; they’re seeing us as their trusted advisor – the go-to for any finance-related queries, no matter how big or small it may seem.”

What’s preventing some firms from expanding to advisory?

So, what’s stopping some firms from adding value by embracing advisory? According to Steve, it comes down to two things: mindset and the ability to deliver.

Good bookkeeping is absolutely critical, he says. Without sufficient data, and efficient access to data, the advisory process will be too time-consuming and won’t work properly. 

Aside from being able to create a cash flow forecast, accountants also need to be able to ask the right questions. “If you don’t have control over the bookkeeping transaction then you can’t really be in a position to best advise your clients on their issues,” adds Jo.

“In essence, [advisory is] conversation accounting. It’s sitting down with your clients, using the financial data – real-time information – and just talking to your clients about what it means, their queries, their challenges, and the issues they’re facing.”

As an accountant, take the time to meet with clients and ask questions. After all, you might be the only person they feel they can lean on when it comes to their business’ finances. 

Using technology to drive advisory forwards

Gone are the days of juggling spreadsheets to manually formulate cash flow forecasts, etc. Today, accountants have an array of smart tech tools at their fingertips, and can create a three-way forecast in a matter of minutes.  

Technology is a necessity, not least of all for accountancy firms who want to do things at scale. The most obvious tools are bookkeeping software solutions like Quickbooks, Xero and Sage. Pay run apps like Modulr are also becoming popular, says Izzy. 

“When we’re telling clients how to manage their cash flow and when to pay certain bills, it’s only as good as them actually following it through. Now, we can sit in the driver's seat and take them to those destinations.”

Accountants can also help their clients access the funding options they need to trade and grow with confidence using Connect, Funding Options’ advisory platform

Enhance your advisory proposition – join Connect today

At Funding Options, we help UK firms access business finance, working directly with businesses and their trusted advisors. We combine our in-depth understanding of the business finance market with technology to find financial solutions that fit. 

We invite accountants to join our Connect. In partnering with us, you can leverage our expertise and pass the benefits on to your clients.

 We provide an instant comparison and help throughout the process, from application to when your client receives the funds. 

To get started, we’ll ask them to provide some basic details, including how much they need to borrow, what the funding is for and how quickly they need it. This won’t affect your client’s credit score. 

As long as the amount your client requires finance ranges from £1000 up to £15M, we can help. We’ll compare over 120 lenders specialising in everything from invoice finance and revolving credit facilities to asset based lending and commercial mortgages

Join the 150+ accountancy firms in the UK already using Connect and register today.

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