53% of small and 59% of medium sized business owners believe the responsibility for setting budgets, controlling payments and determining the company’s financial strategy lies with senior management, despite 1 in 3 senior managers admitting they are unprepared to take on the role according to Basware’s SMB Finance[SJ1] research.
The SMB Finance research surveyed 558 business owners and 1,368 employees with financial responsibility from small to medium enterprises to identify the financial processes and owners of responsibility within SMBs across the UK, US, Sweden, Germany and Belgium & Netherlands.
This research aims to inform SMBs of the challenges they face in growth, as well as educating business owners on the productivity levels of their employees as ‘small business processes’ reach breaking point. The findings also help businesses to understand the investment needed in people, processes and technologies as they move from ‘small’ to ‘medium’ and beyond.
The findings suggest that, with financial responsibility being handed down from owners to senior managers, a much greater understanding of the role is needed if they are to complete it successfully – 45% of senior managers have yet to receive formal financial training. Similarly, those higher up the organisation ladder are unprepared to take on this responsibility – 57% of board members are untrained. The issue does not appear to be restricted to locality, with 28% in Europe and 33% in US wanting greater understanding of how to manage company money.
Conversely, with little structure in place within micro-businesses, business owners are much less likely to hold other members of their organisation responsible for finances. 56% of microbusiness owners state that nobody else within their company is expected to engage with financial processes, with board members (27%) and senior managers (17%) occasionally being trusted with finances.
Basware’s SMB Finance research indicates a greater need for simpler and more manageable processes that employees can engage with. In total, 34% of employees’ job descriptions in Europe and 31% in the US did not include reference to financial responsibility within the role. With an increasing diffusion of financial responsibility, a more holistic approach that allows all employees to engage with basic financial processes could prove beneficial for ensuring that financial activity is appropriately attended to.
Key findings from the SMB Finance research on controlling financial expenditure:
- Company spend rules and regulations – 44% of organisations said that expenditure was controlled by departments and functions, compared to just 18% in the US
- Strict rules on company spenders – 38% of employees say they are not allowed to spend company money, compared to just 3% of employees in the US
- Desire for spend authority – 21% of employees in medium sized businesses say they would like authority to make purchases in their own field vs. 14% in small and 6% in micro
Andrew Jesse, VP at Basware UK comments: “In a tough economic climate, often competing against larger organisations, SMBs have to make tough decisions about the control of finances within their organisation as they pursue growth. The SMB Finance research suggests that, regardless of their locality and size, all SMBs need to take a hard look at the effectiveness of their finance function, which has a big role in the overall effectiveness of their company, if they are to achieve their aims for expansion. Currently, financial expertise is missing where it really counts, and these existing discrepancies highlight a need for greater sensitivity to financial needs, processes and focus on how employees are expected to take control of a role they are not trained to.”
Basware’s SMB Finance research also gives an indication of SMB motivations in the current financial climate:
- 61% of organisations in Europe are currently prioritising finding new business customers to support their growth, compared to 51% of US organisations
- This motivation is particularly prevalent among micro-businesses (62% vs. 53% amongst medium sized businesses)
- However, medium businesses are more worried about controlling their financial infrastructure, with 49% stating cost control (32% among micro-business) and 42% managing cash flow (18% among micro organisations) as a key challenge for their company
European medium-sized business: Organisations with between 50-250 employees
European small-sized business: Organisations with between 10-50 employees
European micro-business: Organisations with up to 10 employees
US medium-sized business: Organisations with between 50—500 employees
US small-sized business: Organisations with between 10-50 employees
US micro-business: Organisations with up to 10 employees