The finance foundations SMEs can’t ignore in 2026

SMEs often view finance as a back-office necessity. Yet for companies aiming to scale sustainably, a strategic finance function is one of the most powerful enablers of growth.

Drawing on extensive experience in working with organisations at every stage of maturity, Richard Davis, CEO of FNLY – experts in making finance finally easy – provides insight into the most common financial pitfalls SMEs face, the practices that lead to cashflow strain, and the KPIs that truly move the needle.

From your experience working with a wide variety of businesses at different stages of growth, what are the most frequent issues you see in how SMEs manage their finances?

The three main issues I see in how SMEs manage their finances are:

1. Thinking that the person who was right to run the books at the beginning and finance is the right person as you grow. Too often people are overpromoted as they are ‘great company’ people but aren’t then qualified for the future. Finance needs to evolve with the business.
2. Not thinking strategically enough from the outset and only considering finance as the money team. It should be the team to help with strategy and growth.
3. On the flip side of that, allowing that person to have too much control and power and therefore stifling growth in the business. By nature finance people (puts my hard hat on) can be negative and very risk adverse. While the anchor they bring can be useful, I like to consider it as scaffolding allowing the business to grow in a controlled environment.

Cash-flow is often cited as a critical challenge for SMEs. From your experience, what practices or processes tend to lead to cashflow problems and how can business owners better anticipate and manage them?

Ultimately the main practice that leads to cashflow challenges is thinking that cash in the bank is an indicator of how the business is doing. I hear too often owners mentioning cash in bank without having an eye of what is owed, or indeed owing and forgetting about other P&L items such as tax, deferred costs etc. Sudden costs then come out and they wonder what happened.

Therefore, it’s vital to monitor cash flows from the start, even when times are good. Get into the habit of producing budgets, forecasts, long term cash flow forecasts and 13-week cashflows. It can be tedious but so is a nasty shock!

What key financial metrics or KPIs should business owners focus on regularly, and how often should they be reviewed?

Each industry will have their own KPIs and a good set of KPIs will be linked to a growth plan, including targets.

There are the standard financial ones (GP%, NP%, debtor days, working capital cycle etc) but sometimes these are there to tell a story rather than provide the answers.

A great business chooses 1-3 north star KPIs that are the dial movers. These are the businesses that really understand their levers and understand how performance in these indicators can make a true difference to growth and the future.

When it comes to scaling a business, what finance foundations do you consider non-negotiable to avoid issues in driving growth?

For me, the top non-negotiable finance foundations required to drive growth are:

• A good tech stack that can grow with the business
• Monthly management accounts with KPIs, including monthly balance sheet reconciliations.
• Regular communication from finance to owners and stakeholders to ensure there are no surprises and a fail fast mentality can be enacted. This will therefore include live forecasting as well as MI.

Given the rapid changes in technology, how do you expect the role of an outsourced finance team or fractional CFO to evolve over the next 5 years?

Technology changed finance. The introduction of Xero and APIs opened up a world of solutions at low costs, enabling businesses to build best in class ERPs and AI will only accelerate that.

However, as before, it will still need owners (eg Xero is managed by professionals and not business owners) and as we move closer to data lakes and agents, the planning, strategy and translation of data are even more important than ever.

I see the Fractional CFO only growing as they become owners of the AI control centre and more business owners want true imbedded partners to support them.

What three things should every business owner should do to improve their finance function in 2026?

1. Question what role finance plays in the business and who you as an owner talks to about the business. The foundations that finance builds is a non negotiable – money in and money out. The next layer is information and strategy, which at the very least is to answer the question – what are the numbers telling us. A good finance department is not sidelined and thought of as the team you least want to talk to, it should be at the heart of operations, guiding, supporting and developing all aspects of the business.
2. With technology moving so fast, a review of the finance tech stack is a must. There are so many solutions on the market that make your life as a business owner simpler. If finance is taking up time, ask why, ask what the process is and ask if it can be automated. There is a solution out there for almost every task.
3. KPIs – make sure you know what the levers are in the business. Business is noisy. If you can shut out the noise that doesn’t matter and focus on the information that will get you to where you want to be then your time will produce far better results. This can take time and in depth conversations to dig into the business, but the results can be enlightening.