Entrepreneurs have vision but lack business skills

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Small businesses are losing billions a year because they fail to manage their cash flow, says a new survey.

An estimated £3.7 billion a year goes unpaid because small businesses have no effective credit control systems to track or chase unpaid invoices.

The problem lies with the traders who are often entrepreneurs with skills they can translate into sales and services, but they spend their time doing their job instead of running their business.

Running a business is not only about doing the work – it also needs time spent on administration like bookkeeping, credit control and cash management.

All too often entrepreneurs with great business ideas lack the experience in managing their money.

The study, by business software provider Exact, revealed 20% of small businesses had forgotten to invoice for goods or services at least once in the past 12 months.

This lapse was expensive – 12% of the invoices were worth between £5,000 and £10,000 of income, while 6% were for more than £10,000.

The research revealed the main concern for entrepreneurs was developing their business, with financial matters lagging in second place.

Hartmut Wagner, managing director of Exact, said: “We don’t want to blow this issue out of proportion, but these findings do highlight that many SMEs who are eager to grow are not doing themselves any favours – particularly with so many of them expressing concern over their cash flow.”

The report also suggests up to 80% of small business owners feel their business finances are out of control.

Nearly half confessed they had cash flow problems.

Entrepreneurs can take more effective control of their businesses by regularly updating financial records and setting up schedules for invoicing and paying bills.

Reconciling bank statements, chasing late-payers and managing cash flow are all part of effective business management.

For entrepreneurs without the time and skills to manage a business, outsourcing the work to a bookkeeper or accountant are options to consider.