Despite an ever-expanding range of small business accounting software and services, a recent Clutch survey of more than 300 small business owners and managers found that 27 percent don’t even maintain separate bank accounts for personal and business funds.
It’s no surprise, then, that 23 percent of respondents have experienced problems with mixing business and personal finances in the past year.
Older businesses appear to have learned those lessons: 80 percent of small business owners of five years or more have separate bank accounts, compared to 68 percent of small business owners of two years or less.
Other key financial challenges listed by respondents include unforeseen expenses (35 percent) and the inability to receive payments on time (21 percent).
“We recommend that if you have a small business – I don’t care how small – you should create a separate bank account,” Basis 365 Accounting co-founder Rhett Molitor said in a statement.
Even with combined bank accounts, survey respondents expressed a surprising degree of confidence in their accounting: fully 95 percent said they’re confident in the accuracy of their financial records, and 46 percent said the quality of their financial records has increased since they began owning or managing the business.
Molitor suggests that may not be entirely correct. “When we get a new customer, [their financial records are] almost never 100 percent accurate,” he said.
Similarly, 93 percent are very or somewhat confident in their ability to file taxes accurately – though 30 percent also believe they’re overpaying their taxes.
Rebecca Miller, owner of the Columbia, Missouri pie shop Peggy Jean’s Pies, said working with an accountant has proved to be a significant benefit for her business. “She’s taught me how to do QuickBooks and a number of things in our point-of-sale system that makes preparing for taxes easier,” she said.
Need for Funding
A recent Xero survey of 500 Australian small business owners found that 22 percent of respondents said access to capital is the greatest pain point or perceived threat to their long-term growth aspirations.
Just 8 percent of respondents plan to fund growth through a business loan. Sixty-seven percent will rely on business profits to do so, and 19 percent will leverage personal savings.
Eighty percent of respondents said documentation and other requirements in obtaining a business loan for small businesses are onerous, and 71 percent would be interested in applying for business funding if there was an electronic process to facilitate it and create the documentation on their behalf.
If funding were available, respondents said they would invest primarily in marketing (61 percent), equipment (46 percent), hiring more staff (31 percent), systems and processes (30 percent) and materials (25 percent).
“Accessing finance can be incredibly stressful for small business owners, with it often having significant implications for their future and the future of their workforce,” Ian Boyd, financial industry director of Xero Australia, said in a statement.