Managing Your Cash Flow

SMEs losing nearly £3bn a year because of unqualified finance staff

5 min read

25 March 2015

A lack of under qualified finance staff means that every SME in the UK could have lost an average of £1,277, due to issues such as tax miscalculations, unpaid invoices and fines – the equivalent of £2.9bn across the UK economy.

Over a third of those responsible for the finances of small and medium-sized businesses (SMEs) do not have a relevant qualification.

The findings come from the Association of Accounting Technicians (AAT) and also suggest that losses include an average of £508 due to tax miscalculations, £399 lost due to an invoice not being issued and £257 for a payment that bounces.

Research also showed that in small businesses where staff have to cover a number of roles, finance and accountancy tasks are often being shared out between employees who do not have the qualifications to ensure they are done correctly.

According to AAT findings nearly two thirds (60 per cent) of small business owners are responsible for their company’s finances on a day-to-day basis, adding to often already hectic schedules, while only around a quarter (26 per cent) of SMEs have one or more dedicated members of staff looking after finance or accounts.

“Running a small business always involves juggling a lot of different priorities. With so much to think about, investing in a qualified member of staff to look after finance and accounting is often seen as a big step,” said Mark Farrar, chief executive of AAT.

He added: “What’s worrying is that many business owners think that finance and accounting for their business isn’t complex enough to need a qualification, and that whoever looks after it can just learn on the job. The fact that businesses are losing money through accounting mistakes shows that this isn’t the case. Small businesses are often fragile, especially in their first few years, and every pound matters.

“Cost is perceived as a barrier to business owners when it comes to finance and accounting qualifications, but it shouldn’t have to be. Qualifications can be very flexible and cost-effective, meaning that support for small businesses is more accessible than people might think. Having qualified staff reduces the chances of losing money through issues like late-payment fines and incorrect invoices, making the business as profitable as possible.”

Read more about the financial team in a business:

Among those managing a typical small business’s finances, 61 per cent have another role besides this, with 50 per cent also doing business development and sales and 34 per cent working in office management. This, says the AAT, suggests that finance is not being taken seriously enough by aspiring business owners, and is dealt with on a part-time basis.

It is also concerned about training and qualifications for small businesses with nearly (48 per cent) of staff who look after finance having learned on the job, without qualifications and a third (32 per cent) of business owners believing that the role isn’t sophisticated or challenging enough to require qualifications.

Around a third (29 per cent) say that finance isn’t a big enough part of their role to justify a qualification. However, 14 per cent of small business owners said that cost is a factor and that their business can’t afford it. One in 10 believe it’s just too expensive to train them.

The research also uncovered a gap in small businesses training their staff with 15 per cent of those asked admitting that they never spend any money on training and 26 per cent only spending money on training “ad hoc” rather than having a dedicated budget.

For those who do have a training budget, this averages out at £1,739 per year – falling to just £603 for micro-businesses. Four in ten small businesses have experienced an employee leaving to join a bigger organisation with more training opportunities. On average, the cost of the business of losing an employee for this reason was £3,340 – often higher than the cost of providing the necessary training.

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