A quarter of small businesses (25.8 per cent)[1] admit they are reluctant to take on employees because it might complicate the payroll and one in every four business owners (24.7 per cent)[2] are being kept awake by financial concerns, according to new research by KashFlow.

The study of 500 small businesses also found that, in a worrying sign of the problems small businesses may encounter if they grow, 31.2 per cent of companies[3] find it increasingly difficult to keep track of their company’s money. In addition, 31.2 per cent admit that if the bank called in their loans tomorrow they wouldn’t know where their money was to pay them.

The lack of control companies have over their accounts is not only stifling business growth, but is also having a worrying impact on small business owners; KashFlow found that 6.9 per cent[4] of respondents are kept awake at night worrying about business finances. These worries are increased as the business grows, rising to 24.7 per cent in businesses with more than ten people[5]. These worries seem justified as 16.1 per cent[6] admit that one accounting slip up could cost them their business.

Sarah Pettegree, founder of Bray’s Cottage Pork Pies, has firsthand experience of many disturbed nights worrying about the cash in her business. “Knowing where the business finance is and keeping an eye on the cash flow has sometimes led to sleepless nights, especially in the early days. It was incredibly difficult not to worry because we didn’t have a buffer in the business for any unforeseen expenditure.

“By using decent accounting software we managed to keep a tight financial ship, but I still have to be careful now; we are a fairly seasonal business and right in the middle of stepping up production, so the costs of our raw materials increase before the revenue is generated.

“It’s only by using the right technology tools, having experience of running the business and disciplining myself not to worry at night that Bray’s Cottage is where it is today.”

At a time when the economy is starting to lift[7] and the government has pledged to fuel the growth of up-and-coming businesses, it seems red tape and inefficient accounting processes are putting increasing pressures on small firms.

John Coldicutt, Head of KashFlow, says, “Recent pledges by the government to support growing small businesses are simply not working. Small businesses should be the growth engine of the UK economy, yet simple accounting processes using traditional paper-based accounting systems are leaving business owners unable to account for their finances and unable to focus on their business.

“Business owners need to be supported so they can run their company effectively and profitably. Key to this is businesses and accountants working collaboratively so both have the same access to up-to-date accounts. This will enable the accountant to act as a trusted adviser and add real value to the business. Meanwhile the business owner can focus on what they do best – growing their business.”

Andrew Bodkin, managing partner at Haines Watts adds, “After years of running businesses in a challenging environment, owners are generally positive about the future and prospects for growth. However, this doesn’t mean that it’s plain sailing for SMEs. Many face a host of challenges which threaten sustainable growth[8]. Accessing new customers, getting the right employees on board and managing cash flow, crop up time and time again as the issues that concern owners the most.

“Owners are so focused on the day-to-day running of their businesses that they don’t often have time to plan future strategy yet it is fundamental to achieving sustainable growth. Haines Watts is increasingly supporting owners through this process and helping SMEs ensure they are building better businesses fit for the future.”

[1] Sole traders and businesses: 2-10 employees

[2] Business owners: 11- 49 employees

[3]Business owners: 11- 49 employees

[4] Sole traders and businesses: 2-10 employees

[5]Business owners: 11- 49 employees

[6] Business owners: 11- 49 employees

[7]http://www.bbc.co.uk/news/business-26935148

[8] Results from 2013 Growth Survey conducted by Haines Watts