By Rich Preece, VP and Country Manager, Intuit UK
As anyone that has been through the experience will admit, running a small business demands blood, sweat and tears. Every day is a careful balancing act of sales, solvency and processes, all in an often unpredictable bid for growth. It takes hard graft, an understanding of the processes involved in getting an idea off the ground — and crucially, how to keep it running. As a result, small business owners have to be laser-focused on the bottom line in order to keep their heads above water.
Poor financial management is one of the key reasons so many firms fail in their early days, with 44 percent of SMEs either running out of cash or coming very close to doing so within the first three years. Despite this, research shows that 50% of SME owners put off doing the books. Whether it’s keeping on top of invoices or managing cash flow, financial management is not why most people decide to start their own businesses (unless they become a bookkeeper, of course). It can be a costly, time-consuming and uncertain exercise, and as a result, it is something that often gets pushed to the back of the queue.
Anything to make this process easier goes a long way. Hiring an accountant is one option and can be an incredibly valuable asset to any business, but sometimes, particularly in the early stages, this is a luxury many SMEs simply cannot afford.
As an alternative, many business owners rely on spreadsheets to do their books. However, research shows that this often leaves them stuck in a cycle of spending hours each month getting annoyed and frustrated, trawling through reams of paper-based records. 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 business owners have the opportunity to move online to work anytime and anywhere, making their financial management even more efficient.
Taking control with the cloud
Many 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 .
“The cloud” is technology many consumers are already using today, possibly without even knowing it. Having an email account that you can check from anywhere is in the cloud and so is online banking when you log on to a site to see your current finances. This same ease of access, to get the information you need when you want it, applies to cloud accounting and can be a real game changer for business owners.
Getting a complete overview of the company finances at the touch of a button 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 or plough more investment into a new technology solution. At the other end of the scale, they could avoid a nasty surprise by realising they need to ramp up sales quickly.
Not only does cloud accounting allow you to see the big picture, it also helps in the day-to-day maintenance of the business. The software automatically syncs and categorises bank data, saving time and reducing data entry errors. It also removes the headache of VAT by providing the information a user needs to complete their VAT return every quarter.
Lastly, having a cloud-based solution also means being able to work on the go. Depending on business needs, this could mean checking the real-time status of an invoice while you’re still with the customer, running payroll from the road or accepting credit card payments for a sale.
Running the accountancy side of a small business can be a laborious, time-consuming and costly process. By taking advantage of the technology available, SMEs can use the cloud to relieve themselves of much of the burden of financial management. And the silver lining? Getting SME owners back to doing what they do best; driving their business forward.