The average SMB employee spends an average of 16 hours and 53 minutes per month on financial processes, equating to two full working days on activity unrelated to their role, according to part two of Basware’s SMB Finance research.
Of those two days spent on financial processes, the most time-consuming exercises include responding to supplier/customer enquiries (2 hours 19 minutes), creating and sending invoices (1 hour 55 minutes) and reviewing invoices to be paid (1 hour 45 minutes). This coincides with the findings that in Europe, almost half of SMB business owners (46%) don’t believe their company has a clear procedure for approving invoices to be paid, compared to 38% in the US. Similarly, 52% of US employees and 50% of European employees do not believe there is a clear process for chasing unpaid invoices, leaving the SMB vulnerable to cashflow challenges.
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 finance 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.
It appears that the lack of clear procedure for receiving and sending invoices is also causing disconnect among business owner and employee expectations due to the invoice payment process. According to business owners, it takes European businesses 8 days and US businesses 4 days to complete a payment after receiving and processing an invoice. Yet, according to employees, it takes European businesses 10 days and US businesses 7 days to complete a payment after receiving an invoice.
The lack of clarity surrounding invoicing procedures is further exacerbated by the fact that a significant percentage of businesses are dealing with invoicing manually, adding further time and resource to the financial process. 64% of European SMBs manually invoice customers (compared to 40% in US), while 77% manually approve / pay purchase invoices.
While medium-size businesses are most likely to receive an electronic invoice from their supplier (72%, compared to 56% in small and 31% in micro organisations), this type of business is also most likely to experience challenges with purchase invoices (91%, compared to 84% in small and 53% in micro organisations). As SMBs become larger and implement more automated processes, they continue to deal with smaller organisations with manual paper processes. The research suggests that micro organisations may be able to improve supplier relations if they switch to an automated invoicing process, in order to align with other companies more successfully when transacting.
Andrew Jesse, VP at Basware UK comments: “Although SMB resources are often being stretched to the limit in this challenging economic climate, employees in these organisations are still spending a significant amount of time on tasks that may be completely unrelated to their role. The SMB Finance findings suggest this resource drain is down to inefficient financial processes and manual systems that are preventing small businesses from transacting successfully with suppliers and buyers, issues that need to be addressed if growth and health cashflow is to be achieved. By automating their financial processes, SMBs reduce pressure on employee time, remove manual errors and establish a platform for growth which stems from effective finance.”
Basware’s SMB Finance research also gives an indication of business owners’ priorities in the current financial climate:
- Medium sized owners’ concerned with strategy: 53% in the US are most focused on budgeting, compared to 27% in Europe
- A greater focus: With more time spent on financial planning, medium businesses are able to plan further ahead, on average 18 months in advance, compared to 15 months among small and 10 months among micro businesses.
- SMB owners on the go: 74% of European and 89% of US owners check their business’ finances outside of work, with slightly fewer than half most likely to check at the weekend
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