Research reveals that many new businesses rely on out-of-date info and nearly two-thirds of entrepreneurs are failing to plan ahead
In an age of analytics and metrics, it’s never been easier to use real-time insights about your company’s performance to make strategic decisions. But it seems that many entrepreneurs are still struggling to make the most of the latest available data on their business, with research revealing that startups are often resorting to using out-of-date information or gut feeling to make key financial decisions.
According to a study by KPMG Small Business Accounting, startups under a year old are relying on management accounts that are, on average, four months out of date. Many entrepreneurs don’t even go as far to use detailed data: it seems 31% of startups are making choices about hiring, purchasing materials or marketing spend based on quick calculations around incoming or outgoing payments or a glance at their bank balance. Perhaps most worryingly, 13% of new businesses rely solely on gut instinct when making financial decisions.
However, with a little context, this begins to make much more sense. The research found that when it comes to financial expertise more than two-thirds of entrepreneurs are entirely self-taught, with a further 63% preparing their own accounts. Unfortunately, this lack of experience appears to be putting businesses in a risky position, with just under two-thirds failing to plan ahead and prepare fee or income forecasts. This has left a quarter of entrepreneurs unsure of how much money they’re able to safely invest in their own businesses.
Bivek Sharma, head of KPMG Small Business Accounting, said: “Getting a business off the ground is a bumpy ride at the best of times but having to make decisions based on what happened four months ago when your business is barely a year old is a frightening position to be in. Great businesses are built on great decisions but owners really need to know where they stand today to make the right ones.”
For those wanting to keep a better check on their finances, it might be time to seek out that new FD or CFO.