Small Businesses Potentially Make Risky Accounting Decisions, According to New Survey Series
Some small businesses are not creating a separate bank account, not creating budgets, or still recording finances on paper – all actions that may expose their accounting to greater human error or security vulnerabilities.
This is according to a new survey series from Clutch, a leading B2B research, ratings, and reviews firm in Washington, DC. Clutch surveyed over 300 small business owners or managers to learn more about their opinions and behaviors when it comes to managing finances.
These businesses may benefit from outside expertise, found either through a software solution or through an external partner.
Data Reveals Small Businesses’ Financial Struggles
The survey found that:
● 27% of small businesses say they do not have a separate bank account for their business.
● 25% of small businesses still record finances on paper.
● 61% of small businesses did not create an official, formally documented budget for 2018.
Small businesses often struggle to manage their finances. Considering the day-to-day obstacles of running a small business, it can seem overwhelming to go out of your way to, say, create a separate bank account when using your personal one seems fine for right now.
Yet, even the smallest of businesses can benefit from following a certain number of recommended accounting practices.
For example, Clutch’s third survey report focused on the importance of creating a budget. David Ambrogio offered commentary on the data on behalf of Tower Books.
Ambrogio discussed how a budget helps businesses plan for their future. When creating a budget, small businesses should “[h]ave a budget line around where [they’d] like to be in the future, and plan for any future costs and expenses,” Ambrogio said.
A budget offers valuable guidelines for small businesses, but it shouldn’t be a cage.
“Allow for a little flexibility in your budget, because too much rigidity is impractical and will not allow for unforeseen circumstances,” Ambrogio continued.
Survey Reveals Small Business Accounting Staffing Choices
The survey also found that:
● 45% of small businesses employ neither an accountant nor a bookkeeper.
● 22% of companies that do employ accounting staff use a full or part-time outsourced accountant.
This shows that small businesses may struggle with their finances simply because they do not have the proper expertise and manpower to handle them.
The survey recommends that no matter how small a business is, they should at least have a bookkeeper.
Yet, many small businesses may choose not to do so because they don’t believe they have the resources to employ accounting staff.
Outsourced accounting can help these types of small businesses. Outsourced accountants can:
● Offer stability. It will be the accounting firm’s responsibility to find new talent if turnover occurs, not the small business’s responsibility.
● Offer tailored help. An outsourced accounting firm can offer small businesses only the expertise they need, when they need it. Thus, they don’t need to hire an accountant they don’t use 50% of the time.
Riley Panko is a Senior Content Writer and Marketer at Clutch, a B2B research firm, and a Senior Writer at The Manifest, a B2B news and how-to site. She conducts relevant research that aims to help consumers enhance their business and select the services and software best-suited to their needs.