What resources do small businesses use to manage their finances? Where are they lacking?
These questions and more were the subject of a recent survey report by Clutch, a leading B2B research, ratings and reviews firm in Washington, DC. Clutch surveyed more than 300 small business owners to analyze the resources they use to manage their finances. Donna Conte, service area leader for Accounting Services at Warren Averett, helped analyze the data, providing expert commentary for the report.
The survey found that nearly half of small businesses (45%) employ neither an accountant nor a bookkeeper.
This can cause issues if the small businesses do not have the necessary expertise in-house to efficiently and accurately accomplish their accounting tasks.
Conte suggested that many small businesses keep minimal staff due to costs.
“They may succeed at keeping their regular costs down when they don’t have a bookkeeper or an accountant, but it may not be the best long-term strategy,” she explained.
These businesses are sacrificing long-term benefits for short-term cost savings. However, the benefits of hiring accounting expertise often outweigh the costs.
“[The businesses] could potentially save money and time on year-end services if they maintain monthly bookkeeping,” Conte said. “It also helps to assist them in knowing what’s happening in their business, so they can run it better.”
Survey Highlights the Strengths of Outsourcing
The survey found that the largest percentage of small businesses (22%) that do employ an accountant have a full- or part-time outsourced one. Outsourcing can provide the expertise small businesses need at an affordable cost.
“Outsourcing is a great way to get insights from a high-level thinker who can help you with decision-making, while also allowing the business owner to focus on operations instead of record keeping,” Conte said. “Many times, business owners spend too much energy on their finances when they should be focusing on what they do best, which is running their business.”
Outsourced accounting can also help businesses that do not need assistance all the time.
“Another big benefit [of outsourcing] is if a company has specialized or seasonal finance support needs – outsourcing is good for that,” Conte said. “These businesses…may not be able to justify keeping a full-time staff member. When the need is there, the outsourced staff can be available.”
Accounting Software Can Benefit Small Businesses
The survey also found that more than half of small businesses (53%) regularly use accounting software.
“[Accounting software is] not expensive,” Conte said. “It offers the benefits of information right at your fingertips, [plus] security and scalability.”
Among small businesses that do use accounting software, the most widely used brand by far is QuickBooks. Nearly three-quarters of small businesses (74%) say they primarily use QuickBooks.
Conte sees QuickBooks as a good choice for many small businesses just beginning with accounting software.
“It’s popular because it’s been around so long,” she said. “It’s proven to be reliable and inexpensive. I don’t think it’s a good fit for everybody, but it can be a good starting place.”
Regardless of brand, small businesses should properly evaluate an accounting software solution before adopting it. Conte suggested a number of questions that small business owners should ask themselves, including:
- If your business grows, is the software still going to be adequate?
- Does it allow for approval processes?
- Does it provide an audit trail?
- Is it reliable? If it’s a cloud-based system, what’s its track record for downtime?
The Separation of HR and Accounting
Both accounting and HR are departments that require specialized skills for dealing with sensitive situations. Yet, for nearly three-fourths of small businesses (72%), one person handles both HR and accounting responsibilities.
Conte said that small business owners must be careful about how they allocate responsibility for these roles.
“They’re separate and distinct areas. Your risk can be high risk if the staff isn’t fully trained in both areas.”
Oftentimes, an accountant will be tasked with HR responsibilities because they handle payroll. Yet, that doesn’t mean they are prepared to handle a diverse array of HR situations.
“HR coordinators have to think about discrimination, workplace safety, and eliminate risk for harassment in the workplace,” Conte explained. “An accountant isn’t really trained to do that and could trip up on some of those things.”
Read Clutch’s full survey report here.