Small Businesses Rely on Old Data and ‘Mental Maths’ to Make Financial Decisions
Small firms are putting themselves at risk with almost half of small business owners basing important financial decisions on “gut instinct”
Small businesses are putting themselves at risk with almost half (44%) having based investment decisions on quick, mental mathematics (31%) or gut instinct (13%), a new report from KPMG Small Business Accounting has warned.
25% of small firms were also found to have relied upon four month-old data to make important financial decisions, while an additional 25% admitted to not knowing how much they could safely afford to invest in their business.
Some of the decisions being made by firms without proper financial analysis included investment in new staff, equipment and marketing campaigns.
The research, which featured 1,000 small business owners, also revealed that only a third of companies forecast income.
All of the respondents admitted that they did not use a professional financial adviser; 69% said they had self-taught themselves finances, and another 63% prepared their own accounts.
Bivek Sharma, head of KPMG Small Business Accounting, commented:
“Great businesses are built on great decisions, but owners really need to know where they stand today to make the right ones… managers have fought hard for the financial skills they need to be successful. But too many are lacking the data and insights to help them make truly informed decisions.”
For more information on monitoring your business’ finances, check out Startups.co.uk’s cashflow section here.