With money, livelihood and reputation on the line, running a small business can be tough. Every day is a careful balancing act of sales, solvency and customer satisfaction, all in an often unpredictable bid for success. It takes hard graft, an understanding of how to get an idea off the ground – and crucially, how to keep a business running. As a result, SME owners have to be laser-focused on the bottom line in order to keep their heads above water.
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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 business. It can be costly, time-consuming and complex, 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, but sometimes, particularly in the early stages, this is a luxury many SMEs cannot afford.
Many SME owners rely on spreadsheets to do their books. However, SME owners we spoke to said this often leaves them stuck in a cycle of spending hours each month, trawling through reams of paper-based records. In fact, many will waste up to a week a year solving issues like understanding formulas, getting the numbers to add up and maintaining version control.
But advances in technology are making it possible for SME owners to move their finances online to work anytime and anywhere, making their bookkeeping much more efficient.
Taking control with the cloud
Most consumers use the cloud every day, probably without even realising. From buying goods through Amazon, listening to music on Spotify or sharing files via DropBox – all are impossible without the cloud.
Many SMEs are starting to manage their finances in the cloud, conducting back office work like bookkeeping and accounting. A study found that 37% of SMEs are already adapting to the cloud, a figure that is set to rise to 78% by 2020.
The advantages are obvious: the same ease of access, to get the right information at the right time, also 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.
The business benefits of cloud
Not only does cloud accounting provide the owner with the bigger 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.
Having a cloud-based solution also means employees are no longer confined to their desk. Logging into work systems and files via the cloud on a smartphone, tablet or laptop, employees can check the real-time status of an invoice while still with a client, collaborate with suppliers in real-time from a coffee house, run payroll from the road or even accept credit card payments for a sale.
One of the biggest pain points for a SME owner to tackle is cash flow – how do you control what’s going out when it’s uncertain how much is coming in? This can lead to problems when new infrastructure or upgrades to business processes are needed, as these often require significant upfront investment. But with cloud tools, this capital investment isn’t needed because the business is subscribing to the use of a product in a pay-as-you-go model. The owner typically only pays a fixed monthly fee, with some services even allowing them to pay for only what they use.
Running the accountancy side of a small business has the potential to be a 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; designing new products and services, meeting customers and prospects and ultimately, driving their business forward.