June 3rd, 2015
A new survey, carried out by the Association of Accounting Technicians (AAT), has revealed that SMEs are losing a total of nearly £3 billion as a result of not having qualified finance staff. So the big question is, what can be done to solve the problem and ensure that companies don’t lose out on vital funding in this way?
These latest findings come after recent research by the Federation of Small Businesses found that 62% of small businesses are expecting to grow this year. However, even when profits and takings are rising and the financial situation looks good in general, no business can afford to lose money unnecessarily.
Where is Money Being Lost – and Why?
According to the AAT, each small business in the UK could be losing around £500 through miscalculating tax. They are also losing nearly £400 through failing to issue invoices, while bounced payments are another source of lost revenue. It’s estimated the overall cost to each business could be more than £1,200.
Why is this happening? One problem is simply the pressure on time. Many people running the finance side of a small business also have another job, so it’s a question of fitting everything in. Sometimes deadlines may be missed, or you may be too busy fulfilling new orders to send out invoices to clients and suffer from late payment as a consequence.
Another factor is lack of staff knowledge and training. If you have to learn complex finance administration on the job, there is a real danger that something will go wrong along the way. Often business owners may assume that managing a relatively small financial operation is not complicated enough to require a specialist qualification, but the fact that so much money is being lost suggests there is a problem here which needs addressing.
What Can Be Done to Improve the Situation?
Training: Getting the right training can help staff to manage finances more efficiently and this needn’t be prohibitively expensive. While it may not be practical for one of a small team to set about becoming a fully qualified accountant, there are short courses available for business people without an accounting background, which will help them to handle financial tasks confidently.
The AAT survey suggested that lack of training is a general problem for small businesses, not only in the field of finance but also in other areas. Around 15% of small companies never invest in staff training, and one reason cited by some employees leaving to join larger companies is the greater training opportunities. So it may be worth looking into short courses to improve knowledge of other specialisms as well as finance. This can save money if it means that you grow expertise in house rather than having to buy it in.
Automation: Another way of addressing the problem of cash being lost is to consider automated finance systems. Like training, this involves an immediate outlay but should then save the company money. There is a lot of specialist software now on the market which makes the task of accounting more straightforward. Specialist invoicing software is also available and some types are even free to download.
Automated systems can make it easier to keep records up-to-date at all times. This is essential for dealing with tax offices and also if you need to apply for finance. It is also helpful for pinpointing where money is being lost and working out ways to keep down costs, as well as calculating more accurate growth forecasts.
Outsourcing: Buying in payroll and/or accounting services is another possibility which will mean that you have qualified experts handling those aspects of your operation. This also has the advantage that your staff are freed up to concentrate on their other roles, rather than having to share their time between too many different tasks.
Tackling Late Payments: One of the most important financial issues for small businesses is late payments. The bank payment service BACS has estimated that companies lose more than £8 billion as a result of this problem, much of this going in staff time spent chasing up unpaid invoices.
There isn’t an easy solution to this, since many small firms are nervous about pushing too hard and offending important clients. However, putting a payment deadline on invoices can help to jog customers’ memories, and it may also be worth considering a software system which sends out automatic reminders.
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