Adnan Zaheer and Lynell Peck are both Finance Partners at PWC.
Adnan was the formal financial director at Arena Flowers and Smart Pension. He is experienced in building up small businesses into medium-sized ones. Now both working for PWC.
Lynelle trained as a speech and language therapist but then pivoted to accounting.
Most companies don’t have a great system for fulfilling their legal obligations financially.
Filing late impacts your company in terms of fines. It also impacts your companies credit rating and it can also damage your own personal credit rating.
The monster can grow very big, very fast and sometimes it can get really really ugly.
When should you hire a finance director?
Adnan would advise that you get a finance director earlier on rather than later.
Tony suggested getting an accountant – otherwise, mistakes will be made. You need someone to keep you on the straight and narrow. It will keep you from getting into trouble.
You cannot withdraw dividends unless a company is making a profit. The articles of the company will stipulate what one can and cannot do from the start, however, these have to be within the law.
They would recommend you find someone who you can talk to and build a relationship with over time. However, if you want your company to grow rapidly then you will need a bigger firm.
PWC will be launching an application for SME’s soon.
Randeep Grewal then talked about cash flow from the back of the room. Does your business generate cash flow in a positive way? (ie. the working capital is negative eg. Tesco). He again emphasised the importance of a decent finance director.
Adnan again – SEIS and EIS schemes are enormously helpful in stimulating investment in SME’s in the UK.
All you need is an assurance certificate. SEIS is up to 150k. EIS is £100k – 5 million. There needs to be UK taxpayer in there to get the tax relief. SEIS – people can even invest in themselves. You have to incorporate within 2 years to get SEIS.
There are also R&D tax credits – particularly web/system development side. If making a loss in that year you can get up to 33.5% money back on your web development. If you make a profit you get 22.5% back. Nifty is PwC’s platform for this.
You have to offer a pension to your employees. (Auto-enrollment). There should also be benefits packages.
Regulatory audits have to be done when you have more than 50 staff. Due diligence, tax health checks, cyber-security health check, restructuring support and risk assurance / corporate governance all need to come in after this.
Finally, people need to tax-plan for their business exit.
Types of Finance Advisor
Book-keepers manage payable accounts at about £10-12/ hour. A management accountant will probably be at least partially qualified and can do some analysis – put it into a reporting form (ie. cash flow forecast.) Accountants will be fully qualified and chartered.
Finance directors come in 3 different types:
- Accountants – who will do tax and reporting.
- Strategic Partners – sit on the board and have relationships with external investors.
- Catalysts – they do the ops and strategy but they also drive the business (normally they are number 2 to the CEO.
My finance partner (PwC app) helps you with all the different levels here. They also have My Lawpartner, My Tax partner.
- In the beginning you with incorporate. Then you will raise family and friends money, angel – SEIS or EIS, crowdfunding, startup loans, grants, (innovation grand, r&d tax rebates, Innovation Vouchers, Regional Growth Funds, Mayor of London etc.). Pension-led, incubators and accelerators.
- Next around the time of Series A: Business angel investors, family offices/corporate venturing, VC (professional option), Crowdfunding, Business Growth Funds, Loans (Bank, Asset financing, invoice financing, Mezzanine Finance [where the debt turns into equity if it is not paid], Bank Referral Scheme).
- Finally in additional rounds or either as the company nears exit: Private equity, VC, Debt Finance (from both banks and non-banks), Mini-bonds (Loans from small-scale investors), Alternative debt financing.)
Will they invest?
- Debt is cheaper than equity – investors will lose interest later on.
- Previous success
- The investor’s confidence is high (market forces have a massive effect).
- Investors will look for the right team, idea and execution and exit plan.
You have to pre-plan – it takes 9 months for the average round to be closed.
Get someone impartial to do the negotiating for you – as the entrepreneur, you are too close to the project to get the best deal.