4 Costly errors to avoid in your small business
According to new research done by growing business platform Xero, small businesses in South Africa are costing themselves an average of R91,311 per year due to a lack of financial understanding. For enterprises with 10-49 employees, this loss rises to R136,205 per annum – making it clear that a mixture of greater support and new tools are necessary to eliminate the gap in financial literacy of new business owners.
The top four most costly mistakes small businesses made in the past year were:
- Irresponsible cash flow use.
- Not investing in new technologies.
- Not using appropriate government support.
- Being too slow to adapt their business.
Within this study, more than 80% of business owners called for more significant guidance and support to avoid making these mistakes in the future, as most rely on themselves or friends and family for financial advice. Financial literacy is paramount for any small business, as having a clear cash flow and making informed decisions is vital for success.
The most significant knowledge gap identified was tax – with more than a quarter of business owners involved in this particular study stating that submitting tax returns were among their biggest struggles. In addition, many small business owners stated that they wished interactions with SARS (South African Revenue Services) would be more efficient. Around 23% declared that they have received a penalty due to their lack of understanding of the process.
The importance of financial literacy in small business owners, who often handle a majority of their operations, has highlighted itself in the change brought by COVID-19. The pandemic was highlighted as the reason for shifts in the way finances are approached. It has also led to many business owners wanting to learn how to better manage their finances.
As small business owners seek better support, most admitted to adopting new systems and software to assist in their financial management and noted that they now have better control over their finances.
The support of a professional accountant at a monthly fixed fee gives business owners access to accurately compiled financial information to assist in day-to-day management and long-term decision making, as well as access to sound taxation and compliance advice.