By Rich Preece, VP and Managing Director, Intuit UK
There’s a fine line between the success and failure of a small business. Understanding business performance through successful management of its finances can be the difference between going the distance and falling at the first hurdle.
Every small business out there is set up in the same way. First comes the spark of an idea, the brainwave that becomes the nucleus of a business. Then there’s the blood, sweat and tears, the hard graft involved in building an organisation and understanding the processes involved in getting an idea off the ground. And then it’s time to sell — time to hit phones and knock on doors from morning till night in order to bring the revenue in that will help the business grow.
This process motivates and drives start-ups and entrepreneurs because it’s fun. It’s creative, it’s risky and ultimately the rewards can be fantastic — a successful business can totally change a lifestyle. If this is the clear inspiration for a small business owner, if this is the glitz and glamour of the small business cycle, one thing is for sure; no one starts their own business because they want to spend more time doing the books. (Unless they become a bookkeeper, of course.)
Despite this, research we recently commissioned showed that many small business owners seem to be stuck in a cycle of spending hours each month getting annoyed and frustrated because they’re using spreadsheets to manage their finances. Indeed, respondents claimed that they waste between 30 minutes to as much as six hours a week dealing with spreadsheet issues such as understanding formulas, getting the numbers to add up and keeping version control. This equates to an average of one week a year.
After digging a little deeper, we found that this had worrying consequences. Over 50% of those quizzed said this wasted time is a cause for frustration as it means they don’t have time for the important things, like relaxing with the family and growing their business. And it is also leading to a significant number of SME owners (again, above 50%) actually putting off doing the books.
This is bad news. In a separate study that we carried out, we found that 44% of SMEs had either run out of cash or come very close in the first three years of trading. The fact is, the ability to manage finances effectively is vital for a small business owner, and is crucial to the solvency of a business. The ability to get an insight into how a business is performing is imperative, particularly into cash flow.
Spreadsheets just weren’t designed for this; you need to be an accounting wizard to get the most from them. Instead, business owners need to be able to manage their finances on the move, on mobile, collaborate with their accountant or bookkeeper, and have all their financial management tools — such as payroll and receipt processing — in one cloud hosted portal . This is the only way to make a dent into the significant amount of time that’s wasted by using software that’s not fit for purpose.
Some respondents referred to spreadsheets as a necessary evil but many have already discovered that’s not the case. By ditching spreadsheets and using cloud-based financial management systems, SMEs can take the pain out of financial management. Platforms exist that allow small business owners to collaborate and work more effectively with their accountants - in real time, not just at the end of the month — enabling both parties to get much more value from the relationship. More importantly, these platforms enable entrepreneurs, start-ups and small business owners to focus on what matters and gives them space to do the things they wanted to do when they set up in the first place.
The message to small business owners is this: it’s time to focus on what you love — and that’s not spreadsheets. So equip yourselves with the tools do so, and help make sure your business’ success matches the ambition you have for it.