If your business is actively scaling, then traditional accounting won’t cut it.
Strategic financial accounting is proactive to help you work smarter, not harder, by making better business decisions.
What is Strategic Management Accounting?
Businesses that want to scale use this insight-driven approach to financial management.
Strategic management accounting (SMA) is a proactive practice to help develop business strategy and undertake no-nonsense decision-making.
It uses both financial and non-financial information to create the right strategy for your business.
There’s a significant positive link between SMA usage and a firm’s performance, but only when organisations carefully embrace SMA practices.
How Strategic Accounting is Different From Traditional Accounting?
Strategic business accounting focuses on the long-term to shape the future of your business. Whereas traditional accounting is more old-school and reactive.
7 Strategic Accounting Practices
Here are some strategic accounting practices that can help you stop guessing your way through your finances like you’re playing pin the tail on the pony.
Control Your Costs
Growth isn’t just about making more; it’s about keeping more! Simply analysing your costs and finding opportunities to save can impact your bottom line.
A strategic accountant can help you control your costs and align your spending with your long-term goals without it feeling scary.
Cashflow Management
Cashflow is often a source of stress within a business.
Without adequate cashflow, you may struggle to cover your bills and daily operations. It could also mean you miss out on opportunities to grow.
A strategic accountant can help you forecast your cashflow and plan for what’s next.
Let’s say, your forecasting shows that in August, your business will have an income of £8,000 but expenses of £12,000. There will be a shortfall of £4,000.
If you know this in advance, you can take actions to ensure this shortfall is covered, such as, accelerating invoices or delaying non-essential purchases.
When your business has sufficient cashflow, you can make decisions quickly and take advantage of opportunities. Plus, studies show it can have a significant influence on the performance of your enterprise.
Risk Management and Contingency Planning
Being able to anticipate problems means you can minimise them. So instead of rushing to find a solution like you’re against the Countdown clock, you can be prepared.
Not only does it help your business operationally, but it instils confidence in investors and stakeholders. It shows them that you have considered risks to the business instead of just hoping it all works out.
Tax Optimisation
Instead of rushing to get your taxes sorted for the end of the year, strategic accounting helps you to optimise your tax to reduce your tax liability legally.
Adopting “proactive and adaptive tax policies can enhance operational efficiency, reduce tax-related uncertainties, and foster a more sustainable approach to corporate financial management”, according to recent research.
Compliance and Regulatory Adherence
Ensuring your business is compliant helps to build trust, avoid penalties, and you can anticipate regulatory change. Without any unexpected surprises (and not the good kind, like being shortlisted for Practice of Year by the Institute of Financial Accountants).
Funding and Investment
Strategic management accountants not only help you to prepare your financials. They can support you with business plans, securing finance, and growth mentoring.
If you want to grow your business, you will need external investment at some point. Thinking about this as early as possible to make your business attractive to investors is important.
Financial Health Monitoring
When you maintain records properly, it saves on lots of time and frustration. If you don’t review your accounts monthly, you won’t know if you’re making a profit or running at a loss, which products/services are performing or where to cut costs or invest more! No review means no control.
Process for Strategic Accounting
A strategic accountant will undertake a lot of research to create a strategy specifically for your business. It’s a long-term process that means partnering with a trusted adviser who helps you to avoid overwhelm and makes things simple.
Understanding Your Business
This includes understanding its vision, mission, and goals along with the competitive landscape, market trends, and other factors.
Gather and Analyse Data
Once that is done, we will gather data and analyse it, both historical and current data. This could include KPIs, cash flow, revenue streams, and anything else that is relevant.
Create a Strategy
The accountant will then create financial forecasts, do scenario planning, and create a strategy to help you achieve your goals.
Implement Your Strategy
It’s important to integrate the strategy with the business operations so your team is working towards the same goals.
Monitor and Review
It’s not the end at this stage because the strategy will need to be monitored and reviewed on a regular basis. This is to ensure everything is going as planned or to make any necessary changes.
Choosing the Right Strategic Accountant
You need a partner who knows financial strategy isn’t just about the numbers. It’s about power and making bold, informed decisions.
You should ensure the accountant is qualified and experienced with this type of accounting. In the UK, around one third of accountants are not members of a professional body and don’t hold formal qualifications.
At M Squared Accountancy Ltd, we’ve had many clients come to us after having bad experiences with previous accountants, including incurring penalties and poor communication.
A strategic accountant is more than someone to outsource your financials to; we are a member of your team that will help you scale.
Grow your business with our strategic accounting services by getting in touch today.
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