Accounting causes stress to micro businesses

Micro businesses spend 10 weeks a year trying to sort out their finances and accounting compliance is one of the most stressful tasks

The most time-consuming finance task is accounting, which takes the smallest businesses 1.7 hours a week, equating to more than one week a year spent solely on keeping the books.

The average micro business works 79 hours per week, of which 15 are spent on financial administration – equivalent to 19%, according to research by digital only banking service, Starling Bank.

Accounting was viewed as the most stressful part of running a business and was more likely than any other task to eat into downtime, with a third (32%) of micro owners stating this was the case.

Tax compliance is another area where micros are concerned that they will trip up over complex laws and face HMRC penalties, while changes to VAT reporting have also had an impact under Making Tax Digital for VAT. 

When asked what could save time in the finance department, one in five (19%) said that being able to see and access all of their finances in one place could be the answer, while one in six (16%) recognised the benefit of having an accounting system integrated with their bank account. 

The research also found that the smallest firms are disproportionately impacted by this kind of work, with sole traders spending almost a third (31%) of their labour time on financial admin work, and companies with 1-4 employees devoting a quarter (25%) of their time to this area.

One Starling business account customer, photographer Aina Gomez said: ‘I didn’t get into business to do finance-related admin, but without it, you are doomed. I’m still learning. I’ve purposely put myself through some training, but I can still say that this is the worst part of running a business.’

Starling was founded in 2014 and its retail banking app offers personal, business and joint current accounts on Android and iOS. The Starling Marketplace also gives customers in-app access to a selection of third party financial services, including accounting software from Xero, FreeAgent and QuickBooks.

Anne Boden, CEO and founder of Starling Bank, said: ‘The importance of micro businesses can’t be overstated. They make up the majority of enterprises in the UK, employ almost nine million and generate nearly a trillion pounds in revenue each year.

‘In our new report, Make Business Simple, our findings unequivocally show that micro businesses are spending a huge amount of time on financial admin work.’

Starling Bank commissioned research agency Opinium to conduct the survey of 1,009 micro businesses in the UK in October 2019. This included sole traders and companies with one to nine employees.

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