Many SMEs struggle to understand finance, a recent report has claimed.
ABN AMRO Commercial Finance’s annual Credit Check report found 51% of accountants believe SMEs do not feel in control of their financial affairs.
The report revealed the extent to which accountants think small businesses are struggling with their finances: 48% are under the impression clients find their finances confusing and complex. 40% feel small businesses are simply ignoring finances.
Many accountants believe SMEs do not take enough time to consider finances, and possible alternative funding methods. A significant proportion (41%) do not see clients more than two times a year.
Over half (59%) of respondents also felt small businesses did not plan ahead and simply made knee-jerk, short-term reactions when issues arose.
Peter Ewen, MD 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.
“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.”
The report also discovered many SMEs are unlikely to seek alternative funding methods, with most still using a traditional overdraft. Many of these will use their personal bank rather than shopping around.