More than half of Ireland’s small business owners lack strong financial literacy skills and leave analysis of company performance to their accountants, according to a new nationwide survey.
The Small Firms Association (SFA) finds in its report published today that most owners and chief executives identify financial literacy as essential for business success – but do not bother reading their own monthly accounts.
Some 35pc of the 132 owners and CEOs surveyed said they had never received financial training. More than half said they did not calculate basic financial measurements regularly.
The SFA said this lack of knowledge at the top represented a roadblock to promoting productivity and enabling innovation that will allow small firms to cope with Brexit and technological advances. Its director, Sven Spollen-Behrens, called for State-backed training programmes to place far greater focus on teaching financial skills to the leaders of micro, small and medium-sized businesses.
“Unlike larger companies who have access to experts, the success of small firms depends on the financial knowledge and skills of the owner,” Mr Spollen-Behrens said. “With the financial world becoming increasingly complex, there is a compelling need for small business owners to improve their financial knowledge and skills.”
The lead author of the study, Thomas M Cooney, a business professor at Technological University Dublin, said the survey revealed a disconnect between small business owners’ beliefs and their own actions. He noted that 81pc of respondents said financial literacy was “very or extremely important”.
“Yet over half of the respondents stated that they do not utilise financial statements, as they believe that is the job of their accountant,” Mr Cooney said. “This report highlights that owner-managers do not recognise the value of using financial information to make better-informed business decisions and generally avoid engaging with financial accounts due to a lack of knowledge.”
The report found that about a quarter of businesses do not produce important financial reports such as debtor/creditor lists, and sales and expenditure reports, while 16pc do not produce accounts on a monthly basis at all.
Only 34pc said they use financial statements to make business decisions, while 42pc admitted that they do not understand such statements. About 58pc said they leave analysis of such monthly performance data to their accountant.
The survey was conducted by the market research company iReach in March.
It involved 83pc Irish-owned firms and almost an even split of men and women, who lead businesses across a wide range of sectors, particularly professional consultancies, healthcare and pharmaceutical firms, retail outlets and educational services.
Of the 11pc who said they had “expert” financial literacy, 83pc studied finance at university and 40pc are fully qualified accountants themselves.
Irish Independent, September 2019