Cashflow, compliance, operations: just a few of the challenges that come with growth

As your business grows, you become exposed to a rising profile of risks, both internal and external. Cashflow, compliance and operations are particular flashpoints. Get the inside track from Katie Clinton, Partner at KPMG.

KPMG Enterprise’s Moments That Make You report can guide you through critical growth decisions, including how to adapt as your business grows.

Katie Clinton, Partner, KPMG

As your business increases in size, you’ll start to surpass certain regulatory landmarks, your systems will be tested in new ways, and cashflow challenges can become more significant. Creating the infrastructure for growth requires having the right defence systems, governance and ways to stress-test requirements. The rewards for getting this right are unquestionably worth the effort, ultimately saving you a lot of time, money and risk exposure.

Compliance: a complex game

The list of regulatory concerns to focus on is not endless, but it can seem that way, with workplace policies, tax legislation (perhaps in several territories), environmental protection and data being just a few of the pressing issues. And it’s not just your own actions that you need to look at: it’s also vital to work through your regulatory obligations in relation to suppliers’ and customers’ operations. For example, do you know if everyone in your growing supply chain is compliant with the Modern Slavery Act?

One highly effective measure that facilitates all your other efforts is the creation of a risk register. While it may sound old fashioned, this is a good way to record internal and external risks facing the business, with an assessment of the likelihood of any one thing happening, and a plan of how you would mitigate against each of the risks. Also, make sure you have an internal audit function that allows you to check that your controls and procedures are operating as they should.

"The list of regulatory concerns to focus on is not endless, but it can seem that way."

Katie Clinton, Partner, KPMG

Robust systems for growth

Without the right governance structures and systems, growth can make your business more prone to risk, and less able to operate efficiently in the longer term. Therefore it’s vital to make sure you think strategically about how and where the business wants to expand: that way you can introduce systems that actively facilitate the journey and keep you future-proof. Here are some key considerations to keep front and centre:

  • Corporate governance and risk management: having the right mechanisms in place allows you to manage risks as the business grows, and makes it possible to take all major strategic decisions with risk in mind.
  • Preventing fraud: robust supplier vetting and procurement procedures are essential for reducing the risk of fraud. Also make sure that rigorous recruitment procedures are in place: it’s often individuals on the inside who are first to identify soft spots in the company’s defences.
  • Data management: strong systems for the capture, management, measurement, storage and use of data can provide major benefits to the business. An example of this is customer data: a firm handle on this can allow you to spot new opportunities and shifts in customer demand quicker than competitors.
  • Cyber security: this isn’t just a matter of having the right technology, it’s also a people issue. Only by embedding the right procedures and expectations can you ensure that employees will play their part in reducing cyber risk by adopting the right behaviours around the use of IT systems.

Crew case study

David Butler, CEO of Crew Clothing, discusses the importance of data, fixing legacy systems and how a new product launch transformed the business’s fortunes.

Read more

''Growth can create complex cashflow conditions, with new suppliers, new processes and new customers all able to cause cash bottlenecks.''

Katie Clinton, Partner, KPMG

Cash: keep it flowing

Growth can create complex cashflow conditions, with new suppliers, new processes and new customers all able to cause cash bottlenecks.

Make sure you have the liquidity you’ll need by knowing at all times what you’re likely to earn, and how much cash or access to debt facilities you need to have ready. It’s important that anyone running major projects checks in with finance frequently to make sure the money is there when it’s needed. Also use cashflow forecasting to make sure eventualities are covered – for example, what if your new IT system runs over by several months?

It’s not just internal factors you need to look out for; today’s unpredictable economic and political environment can turn around to give you a nasty bite. For example, when the surprise Brexit referendum result was announced in 2016, many businesses with dollar-denominated supply chains and no dollar/sterling hedge saw their input prices go through the roof, as the dollar/sterling exchange rate imploded.

The only way to prepare for these ‘black swan’ events is to scan ahead and mitigate against the unexpected. It’s impossible to do this with every external factor, but just by focusing on an agreed few you can reduce your external exposure dramatically.

Key takeaways

  • Create and maintain a risk register to record internal and external risks facing the business, and plans for how you would mitigate each one
  • When renewing and replacing your systems, think strategically about how and where the business wants to expand: that way you can introduce systems that actively facilitate the journey
  • Ensure you have the liquidity you need by always having a clear picture of what you’re likely to earn, and how much cash or access to debt facilities you need ready
  • Use cashflow forecasting to make sure you’re covered for the unexpected – what if your new IT system over-runs?

For more on adapting as your business grows, and many other aspects of growing a private business, download our Moments That Make You guide.

Download the guide for CEO stories and expert advice to help you achieve your business growth ambition.

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