Over two-thirds (69%) of small and medium-sized enterprise (SME) leaders are taking a “do it yourself” approach to accountancy, company formation and tax issues, tackling complex issues without expert support, according to new research.
With the average SME owner spending over a third (37%) of their time on such tasks in their first year, new and potentially complex digital processes could consume their time further still.
As HMRC brings to a close the latest consultation round of its Making Tax Digital reforms, new research from Geniac reveals the potential impact on SMEs across the UK.
At Budget 2015, the Government set out the vision for a transformed tax system and in December 2015 launched the Making Tax Digital Roadmap, outlining more detail about what the transformed tax system will look like by 2020.
With recommendations including the requirement for businesses to send tax updates quarterly through a digital portal, these new regulations are cause for concern for under-resourced small businesses lacking the financial expertise of larger organisations to take on additional admin.
If financial admin becomes an increasing burden, company growth could be the biggest casualty - nearly three quarters of SME owners (73%) believe that their business would grow more quickly if less of their time was taken up by company admin, according to the research.
Eduardo Martinez, co-founder of Geniac comments: “Small business owners have enough on their plates trying to build successful businesses so any additional admin that the new regulations bring in could have a devastating effect. Managing a company’s finances is a vital and complex part of the business which many small business owners already find intimidating.”
Despite it currently being unclear exactly what the new rules will mean for SMEs, most owners will be forced into a steep learning curve. Half of business owners have rejected external experts in different admin areas because “they’re too expensive” and 35% say they don’t have other staff members with the relevant skills.
The study revealed almost a third (32%) of owners aiming to save costs by taking a DIY approach have ended up paying an external expert to fix an error they’ve made when taking on tasks they aren’t qualified to do, which could be intensified as new, unfamiliar rules are put into place.
Mr Martinez added: “While it’s commendable that HMRC are looking at innovative solutions to streamline these processes, right now not enough is being done to educate SMEs about what will be put in place and how to handle their finances in a timely and cost-effective manner. Whatever the government decides, SMEs will need to be more organised and should take advantage of online business platforms to ease the admin burden.”