New research from Worldplay reveals that British small business owners are still operating in the dark, with many struggling to plan for the new year because they do not have the time or the tools to monitor company finances or make accurate business projections.
The research found that one in five small business owners admit to using nothing more than a pen and paper to run their business, spending twice the amount of time on finance and admin than they do selling.
“This unhealthy balance means many business owners feel compelled to cut back on paperwork, even when it leaves them with nothing but a blank sheet of paper to work from when it comes to forecasting,” Dave Hobday, Worldpay’s UK managing director, commented.
Nearly half (48%) of SMEs cannot identify their top 10 customers or their ordering habits while 40% cannot provide an up-to-date monitoring or forecast of revenue and profit.
A further 62% of small business owners cannot identify their top three selling items and 57% are unable to pinpoint their busiest trading day of the month.
Worldpay claims a lack of awareness among small business of the tools and technologies available to help them plan means many see no alternative but to persevere with time-consuming manual processes, which they struggle to keep up to date.
Hobday stressed the importance of educating small business owners on digital technologies. “As we enter the New Year, business owners should make a resolution to spend a couple of hours and do a bit of research. You’ll quickly find that there are some very simple and cost efficient steps you can take to start recording and analysing valuable data about your business, so you can continue to prosper and grow in 2016,” he said.
Duncan Montgomery, tax partner at UK200Group member firm Whittingham Riddell, described the statistics as shocking.
“A properly set up system can deliver top 10 customers in about six seconds, together with high and low performing products, what credit notes have been issued and so on,” he said.
“Once a business gets to a certain size, the owners cannot run it manually and the lack of systems improvement costs the business and the owner money and time. Recognising that early and moving on to a better business system that is more efficient and enables owners to make proper decisions based on real-time information, is critical to compete, particularly if your opposition is already there.”
Jonathan Russell, partner at ReesRussell, another UK200Group member firm, was not surprised by the research and argued that many small businesses do not need technology and data in order to operate efficiently.
“There is nothing new in finding out that many small businesses still record and do most of their business analysis with pen and paper. There is also nothing new in surveys done by companies wishing to provide data and technology solutions saying how much better things could be using technology,” he said.
“However, just because technology can do something, it does not necessarily mean that is the best way. Certainly, there are businesses out there that could and should use their data better, but equally there are many where the proprietor’s knowledge, experience and possibly their paper records are the best way,” Russell added.
“Data is only as good as the use it is put to and many small businesses actually need very little data to be efficient and successful. In fact, too much data, often the result of technology, can be a bigger problem. Worldpay's research points out things that some small businesses might not immediately have to hand but so what if they don't need it?” he said.
“The message should be to businesses to establish the information they need and require and to use the most effective way of getting that information, which might be the use of technology, but equally well it might be a pen or pencil on the back of an envelope."
Poor access to wi-fi connectivity could be contributing to SMEs' disconnection from technology. Ofcom launched a wi-fi checking tool late last year to improve broadband as it emerged that six million UK premises could be receiving a better service, with SMEs particularly poorly served.
The connected nations 2015 report found that only 68% of SMEs have access to superfast broadband compared to 85% of all premises, and 400,000 SMEs have no superfast broadband. In addition, 130,000 SMEs in certain business areas are unable to receive speeds above 10 Mbps.
Rural areas were also still significantly behind urban areas, although the gap was narrowing. Availability of superfast broadband to rural areas reached 37% of premises in 2015, an increase from 22% in 2014.