Rich Preece, VP and Country Manager, Intuit UK
Running a small business can be like walking a tightrope. Every day is a balancing act of sales, solvency and processes, all in an often unpredictable bid for growth. Added to this, the economic climate since 2007 has fluctuated wildly, meaning growth forecasts have shrunk. As a result, SME owners have been laser-focused on the bottom line in order to keep their heads above water.
This has all contributed to an understandably cautious approach by SMEs to predicting success. But the latest research from the Federation of Small Businesses (FSB) has shown that three-fifths of firms expect to grow in the next 12 months. It also goes one step further to say that this growth is set to spearhead the UK’s economic recovery.
It’s really positive to see small business confidence at an all-time high, but that does not change the unfortunate reality that many small businesses will still fail. Our research tells us 44 percent of SMEs either run out of cash or come very close within the first three years of trading.
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So how then can SMEs ensure the numbers they’ve forecast for next year can be met, or even exceeded?
Get on top of the finances
Poor financial management is one the key reasons why so many firms fail in their early days. Despite this, our research shows that 50% of SME owners put off doing the books. Whether it’s keeping on top of invoices or managing cash flow – it’s not why many people decide to start their own business, and can be a time-consuming, challenging and uncertain exercise. As a result it gets pushed to the back of the queue.
However, advancements in technology are helping businesses deal with finances in a more productive and efficient way. The knock on effect is this smart management of processes gives owners the head space needed to focus on doing what they love: designing better products, getting out there to meet customers and prospects and actually growing the business.
Lose the spreadsheets
Our research also shows that many small business owners are stuck in a cycle of spending hours each month getting annoyed and frustrated because they’re using paper-based records and spreadsheets to manage their finances. Respondents claimed they wasted a week a year dealing with spreadsheet issues such as understanding formulas, getting the numbers to add up and keeping version control.
But, spreadsheets should be a thing of the past as SMEs have the opportunity to move online to work anytime and anywhere, making their financial management even more efficient.
Take control using the cloud
Whilst many business owners are still relying on spreadsheets to do their books, some forward-thinking SMEs are starting to use cloud-based financial management software. In fact, the International Data Association believes that half of small businesses will be using cloud accounting by 2016 .
There is a range of cloud-based technology that is helping businesses operate more efficiently. For example, business owners can access their cloud-based invoices and profit and loss statements in real-time, saving them from searching through numerous documents stored on their desktop. Getting a complete overview of their finances at the touch of a button also enables them to make better informed business decisions very quickly. For example, they might look back at their last quarter and decide it’s time to pay their staff a bonus. At the other end of the scale, they could avoid a nasty surprise by realising they need to ramp up sales quickly.
SMEs can be the lifeblood of the economy
Fine tuning processes within an organisation can make a huge difference to the success of a business. Managing finances online is a huge part of this and will help SMEs match the expectations revealed in the FSB’s recent survey results and keep their bank balance firmly in the black.
This can only be a good thing as their success and solvency continues to be essential to the health of the UK economy.