Small businesses struggling to gain control of their finances

October 8, 2018

 

The vast majority of small business owners handle financial matters without professional help, but this is causing them stress and leaving them with less time to actually manage their business.

 

In a survey last year for business innovation charity Nesta, 42% of entrepreneurs said that managing their finances and banking was the most stressful aspect of running their business.

 

That's not surprising when you consider how much time business owners spend on money management, with many forced to give up their evenings and weekends. Young entrepreneurs – those aged between 18 and 34 – are spending an average of between five and eight hours a week on money matters, while those aged 35 or over spend between one and three hours on average.

 

Business owners can spend a huge amount of time chasing late payments, for example. The average late payment debt now stands at £32,000.

 

Often, small business owners may not know where to turn for help. Of the £4bn of small business loans refused every year, only 3% seek alternative finance options.

 

Many small businesses may not know their own financial positions, perhaps through lack of resources or skills: just 38% of small firms produce regular management accounts and many lack timely and useful insight into their finances, Nesta said.

 

One in six (17%) entrepreneurs admit that the stress of dealing with finances has made them unwell.

 

"For many small businesses financial admin is unnecessarily burdensome," said Chris Gorst of Nesta. "There are thousands of products and services available to small businesses but no easy way for them to match these to their needs and circumstances efficiently."

 

Separate research reveals that 78% of small business owners are struggling to find time to manage their company.

 

Financial and professional services group Smith & Williamson said that individuals looking to scale their business should aim to devote a minimum of one day a week to working on their business strategy and actively managing their business. Yet only one in five small business leaders currently do this.

 

"If young entrepreneurs don’t get the help they need to take control of their finances, there is a serious risk that a number of businesses will fail," Gorst warned. "This will harm the UK’s small business sector and potentially put off the next generation of young entrepreneurs thinking about starting their first business."

 

 

 

Sources:

 

https://www.telegraph.co.uk/business/sme-home/small-businesses-gain-control-finances/

 

https://www.thisismoney.co.uk/money/smallbusiness/article-4393984/stress-financial-paperwork-making-business-people-ill.html

 

http://www.p2pfinancenews.co.uk/2017/11/15/money-management-struggles-for-young-business-owners/

 

https://www.nesta.org.uk/blog/introducing-the-open-up-challenge/

 

https://smithandwilliamson.com/en/insights/article/80-of-small-business-leaders-struggling-to-find-time-for-business-management

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