Small business pessimism highlights the need to take insight from your numbers.

According to a recent survey from ACCA UK (the Association of Chartered Certified Accountants) and The Corporate Finance Network, 1 in 5 small businesses believe full trading recovery following the COVID-19 pandemic will take two years.

This gloomy prediction came from a survey of accountants representing 7,065 clients. The same article claimed that SMEs are in a state of paralysis and feel unable to plan their financial future.

Claire Bennison, head of ACCA UK, said: ‘The consequence of this uncertainty is to leave them lacking confidence in their ability to secure the financing necessary to get back up to speed as quickly as possible.’

‘The temptation is for small business owners to remain cautious and delay investment, which will only postpone a return to normal trading. There will inevitably be insolvencies in the coming months, but some of those will be avoidable if owners are able to examine whether their business strategy is still suitable for a post-COVID world.’

At Whittock Consulting, whilst we’re not seeing as pessimistic a view amongst our own client base, the article does emphasise the need for small business to really understand their financials, from cashflow, to profit and loss and the balance sheet, to assess whether or not they can achieve their business strategy or whether changes need to be made. Decisions made in the next few months could have far reaching consequences, and so these decisions should be based on financial insight.

There will be inevitable pressure on working capital as we start to return to pre-pandemic levels of trading and this coupled with repayment of Bounce Back Loans (BBL’s) and Coronavirus Business Interruption Loan Scheme (CBIL’s) means companies need to understand their numbers better than ever before.

Whilst these loans have been essential to keep companies trading, in many cases, these loans have effectively been used to fund losses over recent months and since the loans do not go through the company profit and loss account as income, this can hide potential issues arising in the company’s figures. Whilst cashflow may look OK, the profit and loss account might not be looking so great, and therefore should not be ignored. Actions taken now could also affect the balance sheet come year end.

Why is this a concern? Here are just a few issues that may flag concern:

  • Tax implications – Many clients pay themselves via a modest salary and top this up via dividends. However, dividends can only be paid out of distributable profits. If losses have been incurred, are there going to be any profits to distribute?  Taking dividends when the profits are not there has tax implications and this can lead to extra costs to the business in the short term.
  • Credit scores – Many suppliers rely on clients who have a strong balance sheet to do business with. Some also use credit checking agencies to check the ongoing viability of a company to complete its obligations.  A poor balance sheet could lead to issues with securing trade credit with suppliers.  There are many possible solutions to this problem and companies should be considering what they can do now to preserve trade credit limits in the future.


Being able to carefully forecast is more important for SMEs, now more than ever. We are expertly placed to assist in these issues and would highly recommend planning for your year-end now.

Whittock Consulting know how important it is to find the right accountant to take care of your business. We provide accountancy services to growing and ambitious businesses in Bristol and the South West, turning numbers into financial insights. If you are looking for advice and personalised accounting tips, please don’t hesitate to get in touch.