Survey highlights need for accountancy knowledge

The results of a nationwide survey of over 350 accountants who were questioned about the bookkeeping practices of their small business clients has highlighted that many of the UK's small businesses have a need for improved accountancy knowledge.

The survey, carried out by business software specialists, the IRIS Group, questioned accountants on a range of topics affecting their small business clients finances, from the recording of accounts to issues relating to cash flow management and tax.

How small business owners recorded their accounts drew an interesting response from the participants, as 40% of small businesses were found to still create their own spreadsheets and systems to record items and devise their own categories, rather than use accountancy software packages.

"When companies use 'home made' spreadsheets it can result in a whole host of problems for both the accountant and the small business owner," explained Martin Leuw, CEO of the IRIS Group. "Not only does it mean a considerable duplication of effort by the accountant when he puts the information into his own system but it can also cause more serious problems such as poor cash flow and tax management, problems which can easily spiral out of control."

Cash flow management was highlighted in the survey as being a serious problem for a large number of small companies, with 86% of accountants questioned stating that they considered up to a quarter of their small business clients to be poor at cash flow management and less than 6% of accountants questioned said that the majority (over 50%) of their clients could be considered good or very good at cash flow management.

The survey also provided evidence to suggest that small companies struggled to understand Inland Revenue and tax forms. Almost 70% required expert advice to understand government documents and forms for VAT and 8% turned to their accountant for advice on Inland Revenue forms.

As well as making more of accountant's business knowledge, Martin Leuw recommends small businesses invest in accountancy software to help them manage their accounts more effectively. He added: "Accountancy software helps small business' avoid getting into financial difficulty, it can automatically highlight cash flow issues such as bad debts before they become too much of a problem and can also remove many of the tax difficulties associated with VAT compliance and tax."

(CL)