Thursday 17th December, 2015

According to a study by KPMG Small Business Accounting, ageing financial information is stunting growth in the UK’s small businesses.

The research found that with better financial visibility, small firms would have invested up to £1 billion more in the economy in the last financial year. Outdated financial information is resulting in lower levels of investment, employment, stunting productivity growth and holding back the economic recovery.

Small business’ management accounts are, on average, four months out of date, and there is also a direct link between current financial information and likely growth for these businesses.

Those with accurate information grew twice as fast as those with nine-month-old data over the last twelve months (8% compared to 4%).

Bivek Sharma, head of KPMG Small Business Accounting, comments:

“Running a growing business is a bumpy ride at the best of times, but having to make decisions based on what happened four months ago is a scary place to be. Great businesses are built on great decisions, but owners need to know where they stand today to make the right ones.”

Interestingly, half (50%) of small business leaders are entirely self-taught when it comes to finances and two fifths (40%) prepare their own accounts. Just 8% said they consult an accountant or professional adviser when investing.

This lack of a comprehensive picture may explain why two fifths of UK small business leaders (40%) are still concerned about financial uncertainty, despite the country’s relatively stable economic condition. Small business owners also spend more than two and a half hours on average each week trying to stay on top of their finances.

Precise information is central to a firm’s growth prospects, with those that prepare income forecasts growing by a third more than those that did not (9% compared to 6%) in the last twelve months.