We asked bookkeepers this question since they are on the front line helping small businesses succeed. We didn’t have any prompts, we simply asked “What are the biggest issues facing small businesses?” Here are the responses;
The top three issues are:
1) Cashflow (28%)
2) Government Compliance (23%)
3) Bookkeeping (19%)
Admittedly, these are all pretty big issues that are interrelated with other areas. Let’s examine the comments related to each.
Cashflow was the single biggest term mentioned at 28% and it is no surprise. Most small businesses struggle with cashflow. Afterall, it is the lifeblood of any business. However, other comments point toward the multifaceted aspects of cashflow including sales (6%), business planning (6%), profits (5%), financing (5%), accounts receivable (4%) budgeting (3%) and managing growth (2%). Small businesses are obviously struggling with all of these elements of running a business and all roads lead to cashflow.
The second biggest category mentioned by 23% of bookkeepers related to the issues small businesses are having with government compliance. This included various types of taxes (corporate, GST, PST, HST), payroll taxes, insurance reporting formats, reporting periods and frequencies, regulations and more. Navigating through these different elements of red tape is daunting for small businesses and can often be their demise. keep up with Government demands for reports in multiples periods and categories. The underlying rules and laws that governs in each specific departments.
“Rules, laws & guidelines! Getting everything right for every branch of every level of government is a ridiculously complicated.”
“Compliance with laws. Many business owners do not understand what they can write off and how they need to keep records in order to substantiate those write-offs. This lack of understanding and compliance is very costly.”
Small businesses are looking for guidance on government compliance issues and turning to their bookkeepers for advice. More worrying is small businesses not knowing what they don’t know! In this case, bookkeepers and accountants need to proactively guide them in the right direction.
Bookkeeping was the third biggest category mentioned at 19% where bookkeepers are challenged with obtaining proper records from their clients. Now the fact that we are talking to bookkeepers about the needs of small businesses most likely skewed this result. However, it is interesting nonetheless. After all, bookkeepers aren’t magicians. If they can’t get the correct information (receipts, statements, invoices), they can’t do anything with it. Garbage in, garbage out as they say.
“When clients initially come into us most are struggling to not only understand, but keep caught up with every aspect of bookkeeping and business reporting requirements. Because of this they deal with issues of poor billing rates/practices and even worse cost control practices. In a nutshell, many are or have lost control of their own businesses.”
Tied into the challenges of bookkeeping was a theme of small businesses requiring either greater understanding of their financials and/or the time to review them.
“My clients are challenged with finding time to look and analyze financial statements on a monthly basis.”
It is no surprise. Small businesses are busy wearing their many other hats – they don’t have the time to wear their bookkeeper and accountant hat. Many small business owners are too busy working “in” the business instead of “on” the business which is what a financial analysis can provide.
If you look at these three issues backwards in terms of priority, they can help solve themselves. If small businesses have good bookkeeping, it will help them with compliance with government regulations which in term will help them with cashflow.
NOTE: The data presented in this blog post is based on a jointly sponsored survey between Mentio and IPBC that was conducted with members of the Institute of Professional Bookkeepers of Canada (IPBC). The data was collected during their annual conference held in September, 2014. Approximately 600 IPBC members took part in the online survey providing us with robust information on trends in the bookkeeping industry and insights into the accounting needs of small businesses.
This blog post was originally published to Mentio.ca in 2015.