Small businesses are the backbone of our economy. With 61% of the working population being employed by smaller companies, we rely heavily on their resilience. Yet, with economic changes such as Brexit and the pandemic, high inflation, supply chain issues and a rising rate of insolvency (the highest it’s been since the 2009 financial crisis), there’s a lot to manage and control.

Fortunately, accountants have risen above these challenges and have continued to step up, supporting their business clients in their time of need. As we enter further into 2023, a different set of challenges will come into play, and clients will need access to continued support.

We know from the Bank of England data that typically small businesses are slow to react when there is a potential cashflow risk. Taking a more reactive approach, small businesses are behind the curve when it comes to borrowing compared to larger businesses.

If the proactive approach from larger businesses can trickle down to the UKs smaller enterprises, we can expect to see our small businesses better protected in 2023 as they start to react to changes in a more productive way. In fact, according to Bain & Company (2019) businesses that take action in crisis, outperform over the medium term.

What are the current key challenges small businesses are facing?

Staff shortages

Increased material costs

Supply chain disruption

Higher energy and fuel costs

Rising overhead costs including rents and interest rates‍

How can you ensure that your small business clients are staying proactive?

As accountants, time again, you have advised small businesses on what actions to take to remain resilient, and this recession will be no different. With regular client meetings, you can assess the business’ stability, forecast cashflow risk and opportunities and review business plans. This can be made easier with the use of credit information to see the health of your clients balance sheets.

Glen Collins, Head of policy at ACCA, describes how accountants and advisers can make an impact on the health and growth of businesses with their ongoing support:

“When you look at the work that accountants and advisers do, a lot of that is working through the options that will allow businesses to survive and prosper on the cash it’s got coming through. This is about providing the appropriate service, tailoring to a particular business’s needs and enabling them to plan, recover and grow.”

What actions could small businesses be taking?

There are a number of actions you can help your clients start taking to ensure they’re best protected in 2023.  Below are a couple of key steps:

1. Reviewing job costing and pricing

Between inflation and continuous supply chain issues, the cost of materials is continuing to rise. Help your clients to price their materials accurately, and consider the importance of doing so on their profit margins and cashflow.

2. Help them negotiate better terms with credit profile

Credit scores impact a business’ access to finance, whether that’s looking for a loan with the best interest rates, tendering for new work, or looking to negotiate better supplier terms. A good credit score can set a business up for success. Research from Capitalises’ Get Fit For Business report found that only 29% of businesses even know their credit score. With Capitalise for Business, your clients can take control of their credit profile and receive alerts on any changes to their credit profile, so they can get ahead.

3. Help them identify which companies to work with to minimise external risk

Encouraging your clients to credit check the companies they work with can help them to understand external risks. With Capitalise for Business, clients have the ability to track the payment performance and credit profiles of other companies. So your clients can be prepared to know which terms to offer and which companies to work with. They can also feel more secure by checking the credit profiles of suppliers, identifying any potential issues in their supply chain early on.

4. Help them access funding when needed

70% of small businesses believe rising costs are their biggest challenge currently, so being able to access business finance can make a real difference in a difficult period. Whether your clients are looking to bridge a cashflow gap, or grow and purchase new assets, funding could bring a positive impact. The ability to access the right loan from the most suitable lender, without spending hours on multiple applications, can be a big help.

With Capitalise’s funding marketplace, your clients can access 100+ lenders, get specialist advice and apply to up to 4 lenders in one application.

However, with time and resources being a challenge when trying to offer more support and advice to clients, ‘Client Tools’ allows you to provide your clients with a 360 view of their cashflow in a completely self-serve format. They will be able to access their Experian credit profile, check the profiles of companies they work with and apply for funding with a carefully selected marketplace of lenders.

Start 2023 by empowering your clients with the right tools for them to grow, without having to put in extra resources.

Capitalise and the ACCA, have developed a complete guide on the predictions for 2023 and how to protect your clients against these challenges. To read more, you can download the full guide here.