Senior managers of SMBs unprepared for financial responsibility expected of them

30 January 2013

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A lack of training and mixed sentiment towards finances within businesses is inhibiting the roles that employees are expected to complete

Espoo, 30th January 2013 – 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 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 organization 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 organization 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 organizations 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

John Webster, Vice President of Global Product Marketing, Basware comments: “In a tough economic climate, often competing against larger organizations, SMBs have to make tough decisions about the control of finances within their organization 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 organizations in Europe are currently prioritizing finding new business customers to support their growth, compared to 51% of US organizations
  • 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 organizations) as a key challenge for their company

Research definitions

European medium-sized business: Organizations with between 50-250 employees
European small-sized business: Organizations with between 10-50 employees
European micro-business: Organizations with up to 10 employees

US medium-sized business: Organizations with between 50—500 employees
US small-sized business: Organizations with between 10-50 employees
US micro-business: Organizations with up to 10 employees

 

About Basware

Basware is the global leader in cloud based e-invoicing and purchase-to-pay solutions with more than 1,000,000 users in over 60 countries. Basware’s B2B Cloud solutions and services provide an open, secure and global ecosystem for buyer and supplier collaboration, connecting more than 1.9 million buyers and suppliers globally. The solutions are architected to meet the needs of SMEs and global enterprises and are built upon Basware’s deep knowledge and experience of B2B financial processes, coupled with intelligent cloud connectivity and the Open Network. With Basware, organizations benefit from more efficient procurement, accounts payable and accounts receivable processes, sustainable cost savings, better insight to cash flows and improved buyer-supplier relationships. The solutions are available via the cloud, on-premise or through business process outsourcing in Europe, the US, and Asia-Pacific through an extensive network of Basware offices and business partners.
 

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