Small and medium businesses ‘leaking’ £2.9 billion due to unqualified finance staff

Just 26% of small businesses have dedicated finance staff.
Monday 23 March 2015 - 09:00

New AAT research has discovered that 36% of people responsible for finances in small and medium businesses (SMEs) do not have a relevant qualification.*

As a result of not having qualified finance staff, 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 £2.9 billion across the UK economy.

Losses include an average of:

  • £508 due to tax miscalculations.
  • £399 lost due to an invoice not being issued.
  • £257 for a payment bouncing.

Silent risk of SMEs losing money

AAT released the figures to highlight the silent risk of SMEs leaking money, and encourage small businesses to think about qualifications for their accounting and finance staff

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

  • 60% of small business owners are responsible for their company’s finances on a day-to-day basis, putting an extra strain on their time.
  • Just 26% of small businesses have one or more dedicated members of staff looking after finance or accounts.

For people managing their small business’ finances:

  • 61% have another role besides this, with 50% also doing business development and sales.
  • 34% also have a role in office management.

This suggests that finance is not being taken seriously enough by aspiring business owners, and is dealt with on a part-time basis.

Training and qualifications for small businesses

48% of staff looking after finance roles have learned on the job, without qualifications. 32% of business owners believe that the role isn’t complicated enough to need qualifications.

29% say that finance isn’t a big enough part of their role to justify a qualification. However, 14% of small business owners said that cost is a factor, saying the 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:

  • 15% never spend any money on training.
  • 26% only spend money on training ‘ad hoc’ rather than having a dedicated budget.
  • For those with a training budget, this consists of an average £1,739 per year - dropping to just £603 for micro-businesses.

Four in 10 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 training.

Mark Farrar, chief executive of AAT commented:

“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.

"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.”

Lindsey Dove, owner of Berry Cocoa Handmade Candles commented:

“When you’re starting a new business you need every penny you can to help you get off the ground. To think that I may have been losing money during my first months due to my own lack of understanding of how to manage my finances is quite a scary thought. I could definitely have used that money starting up!

"I started the business with only £200 but because I had the knowledge of budgeting and costing abilities, I have turned that small amount into a surprisingly popular and profitable business.

“Since taking up an AAT qualification I feel more confident in my abilities to manage my business’s finances and business has certainly blossomed since doing so. As a business owner you are responsible for the success of your company, so if you want to succeed you need the knowledge on how to control your finances.”

(Lindsey Dove started up Berry Cocoa Handmade Candles from home, and now runs her business with the help of an AAT qualification)

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*Research carried out by Censuswide. 508 owners of businesses employing 1 - 250 people were surveyed in February 2015. The Government’s definition of SMEs according to its last SME survey (PDF)  is a company with 250 employees or less, meaning businesses with 250 employees or more are deemed large corporations. AAT estimates there are 2.25 million SMEs across the UK, according to figures from the Office of National Statistics. If each of these lost £1,277 it would total £2,873,250,000 or nearly £2.9 billion.