Majority of SMEs fail to understand their finances

Half of small to medium-sized businesses are failing to grasp their own finances, with accountants claiming SMEs are "burying their heads in the sand", a report has found.

The majority (51%) of accountants said their small business clients are not in control of their finances, according to invoice and asset-based firm ABN AMRO Commercial Finance, which surveyed about 200 accountants. Just 39% said SMEs had a grip on their accounts.

The research showed that many accountants believe SMEs are ignorant when it comes to their finances and many are failing to dedicate enough time to their finances.

Nearly half (48%) of accountants said clients find their finances complicated and confusing while 40% said SMEs are burying their heads in the sand when it comes to their financial affairs.

The research found that almost two thirds (64%) of accountants believe that many of their clients do not spend enough time dedicated to financial management.

Peter Ewen, managing director at ABN AMRO Commercial Finance, said: “In this difficult economic climate, many SMEs have replaced financial management with a ‘batten down the hatches’ mentality and are failing to focus on finance just when it matters the most."

He added: “Despite the challenges of the last few years, business owners cannot afford to lose control. They must look to educate themselves and plan ahead or risk being overtaken by the competition.”??