Preparing Your SME for 2026: A Finance Director's Perspective

As we enter the new year, now is the ideal time for small and medium-sized businesses to reassess and strengthen their financial foundations. With continued economic uncertainty ahead, here's my advice on how to prepare your business effectively.

Start with a Financial Health Check

Begin by reconciling your balance sheet and ensuring your financial information is current and accurate. This gives you a clear understanding of your starting position and forms the foundation for everything that follows.

Master Your Cash Flow

Profit doesn't pay the bills, cash does – therefore, a realistic, rolling 13-week cash flow forecast is one of the most useful tools at your disposal. 

Update your forecast weekly to know exactly when money comes in and goes out, as this visibility helps you to spot pinch points early and make confident decisions. 

Aim to maintain a cash reserve covering at least three to four months of essential operating expenses as a buffer against unexpected downturns.

Tighten Your Financial Processes

• Credit Control: Many SMEs leak cash through slow-paying customers and unclear terms. Set clear payment terms (ideally 30 days or less), invoice immediately after delivery, and chase overdue invoices systematically. You may wish to consider deposits for larger jobs. Every day you delay chasing is essentially the same as lending your clients money interest-free. 

• Purchase-to-Pay: Do you approve spending before ordering? Are you using technology to improve the accuracy and speed of invoice processing and supplier payments? Small improvements here can dramatically impact working capital.

  
  

Build a Management Reporting Rhythm

If you're only looking at your numbers when you do year-end accounts, you lack the insight you need and risk making decisions based on guesswork. Create a simple one-page dashboard to look at key numbers - revenue, gross margin, overhead costs, debtors aging, and cash position – and review monthly at a minimum. 

Review Pricing and Profitability

Costs have shifted significantly over recent years, yet ma

ny businesses haven't adjusted their pricing accordingly. Conduct a margin analysis across your products or services to identify where you're earning well and where you may be undercharging. If certain lines or clients are consistently low margin, consider repricing, redesigning, or retiring them.

Audit Your Cost Base

Examine your three biggest cost areas after salaries. Can you negotiate better supplier terms? Pull your bank statements and identify every software subscription, service contract, and recurring payment. Cancel what you're not using, negotiate better rates on what you are, and consolidate where possible. You may be surprised at how much unnecessary expenditure accumulates.

Strengthen Your Budgeting

Build a budget reflecting realistic volumes, costs, hiring plans, and investment needs—not one built purely to hit a target. Turn it into a monthly dashboard and track performance, revisit assumptions, and spot trends early. 

If you haven’t already, I would recommend investing in cloud accounting software or automation tools that streamline operations and free up capacity without increasing headcount.

Review Your Financing

Check your existing facilities, renewal dates, and covenants. If you'll need financing in 2026, start those conversations now—your negotiating position is stronger when you're not desperate. Lenders increasingly want evidence of controls, good forecasting, and strong cash discipline.

Plan for Tax Obligations

Know what's coming and when for corporation tax, VAT, and PAYE. Set money aside monthly rather than scrambling when payments are due. Ensure you're claiming all available tax reliefs, including R&D Tax Credits.

Refresh Your Risk Management

Conduct a short annual risk review covering cybersecurity, supply-chain resilience, and talent retention. Insurance, backups, dual suppliers, and documented processes often pay for themselves.

Set SMART Targets and Maintain Strategic Clarity

I would recommend not just setting targets for revenue but having targets for gross margin, operating profit percentage, and operational factors specific to your industry. 

Ask yourself the following questions: 

• Where do we want to be by year-end? 

• What must change for that to happen? 

• What should we stop doing? 

• What should we start doing? 

• What do we need to do more of? 

A sharper focus improves both performance and financial resilience.

Does your business need help getting your finances in shape for 2026?  Whether you're seeking strategic finance director expertise to drive growth or practical bookkeeping support to bring your records up to date, I'd be delighted to discuss how Hale Portfolio can help strengthen your business.