Lack of SMEs expertise weakens the backbone of the UK economy
As small business funding continues to be squeezed, many SME owners are finding it increasingly hard to grow their businesses, forcing them to think outside of the box in order to survive. It comes as no surprise that almost 1 in 5 small businesses has considered closure in the past year in the face of rising costs.
Indeed, when Minister for Implementation, Oliver Dowden MP, wrote in 2018 that “small businesses are the backbone of [the] economy”, the last thing SMEs expected was for the government to propose a cost of living campaign asking businesses to lower their prices to support their customers. The campaign has been criticised by the Federation of Small Businesses and the British Retail Consortium for being out of touch with the challenges of small UK entrepreneurs.
Indeed, financial support remains a major source of concern for small business owners who argue that financing options remain too complex and hard to obtain for their ventures. Many SMEs are contemplating new strategies to drive their overall business costs down by shifting the focus to growth. In the words of James Cash Penney: ‘Growth is never by mere chance; it is the result of forces working together.’; but for SMEs, the problem is not about planning growth but finding the forces that will work with them.
A recent survey by Tide Finance reviewed payroll management in small businesses. On average, a UK SME with under 50 employees spends £300 every month in payroll management and admin costs. This can add up to over £3,500 every year simply to pay employees. SMEs in the UK are collectively spending £1,7 billion every month running payrolls.
The cost of payroll uncovers a frequent problem regarding both time and ineffective payroll solutions. On the one hand, SMEs waste time managing and accounting for complex work arrangements. On the other, over 70% of small businesses claim they rely on payroll software or their accountant for payroll administration. For SMEs, it is a wake-up call to consider new payroll management solutions.
Talent acquisition is frequently mentioned as a miracle solution against significant cost waste. Would SMEs spend less money on ineffective processes such as payroll management if they hired a payroll expert from the start? The answer that Oleeo’s research provides is negative. Small and medium businesses spend over £125,000 a year on failed recruitment, with almost 40% of employees leaving within six months. Additionally, failure to understand employment law also leads to a growing number of disputes which need to be settled at an employment tribunal.
There is no denying that ineffective employment and expertise at hand can account for a vast amount of expenses, making it tough to stay afloat in an environment where rising costs threaten their financial stability. Perhaps, this would explain why more and more businesses are not only outsourcing their HR and payroll services but also seeking dedicated HR consultancy for support, hence building a stable and legally safe strategy for keeping talent within the business.
After all, it appears obvious that the FSB and BRC hit the nail on the head when they describe a lack of understanding of the realities on the ground. From out-of-touch government’s campaigns to ineffective talent deployment, SMEs need experts who understand their challenges to remain instrumental to the British economy.