SMB Financial Management Trends
- Lane Smith
- May 17, 2024
- 1 min read
In today's dynamic business landscape, small and medium-sized businesses (SMBs) face numerous challenges, especially concerning financial management. A recent study on Financial management trends sheds light on the prevailing trends and concerns among SMBs as they navigate economic uncertainty. This blog post explores the key findings from the research, sponsored by industry-leading companies Workday and Xero, to provide valuable insights into the financial management practices of SMBs.
Fears About Negative Economic Trends Are Widespread:
The study reveals that a significant majority of SMBs express concerns about macroeconomic trends beyond their control. Rising inflation, supply chain disruptions, and recessionary fears are among the top worries impacting their businesses. Inflation emerges as the primary concern, with 83% of SMBs expressing worry over its potential adverse effects.
Levels of Concern Vary by Industry:
The level of concern varies across industries, with certain sectors showing heightened anxiety. SMBs in financial services, manufacturing, and medical & dental fields are among the most "very concerned" about prevailing economic trends, while other sectors display varying degrees of concern.
Confidence About Navigating Through Changing Business Conditions Is Somewhat Tempered:
Given the volatile business climate, SMBs exhibit a degree of caution about their adaptability. Approximately 46% of SMBs report being "somewhat confident" in their ability to navigate through changing conditions. Larger SMBs generally demonstrate higher confidence levels compared to smaller peers, with confidence varying significantly based on industry.
A Majority of SMBs Forecast Revenue Increases Despite Looming Challenges:
Despite economic uncertainties, a positive outlook prevails among SMBs regarding revenue expectations. Approximately 63% of SMBs anticipate revenue growth in the next fiscal year. Optimism is particularly strong among larger SMBs, with those employing over 500 employees being 1.5 times more likely to expect revenue growth.
Top Financial Management Challenges Center on Staffing and Data Security:
For SMBs, financial management challenges revolve around staffing and data security. Difficulties in hiring and retaining staff, securing sensitive financial/customer data, and reskilling staff for new requirements are identified as the key challenges. Industry-wide, these challenges remain consistent.
SMBs Rely on Both Internal and External Resources for Financial Management:
SMBs employ a mix of internal and external resources for financial management. Business owners, CFOs, and finance managers often take charge of financials for smaller enterprises. As companies grow, the role of CFOs becomes more prominent, and the use of external accountants increases.
The SMB Accounting/Financials Solution Trajectory Has Clear Break Points:
The study indicates clear break points for the adoption of accounting/financials solutions. While nearly half of solopreneurs manage without any software, a significant shift towards dedicated financial software occurs when SMBs employ 2-4 employees. As SMBs exceed 20 employees, dedicated financial management software becomes the norm, with cloud-based solutions gaining traction.
Most SMBs Are Satisfied with Their Current Accounting/Financial Management Solution:
The majority of SMBs express satisfaction with their current financial management practices. SMBs tend to stick with existing methods until growth or specific needs necessitate a change. However, a considerable percentage plan to explore dedicated accounting/financial management software in the next 12 months.
The Move to the Cloud Is Well Underway:
Cloud-based financial management solutions are gaining popularity among SMBs. More than one-third use cloud-only solutions, while others opt for a combination of cloud and on-premises software. A majority of SMBs express a strong preference for buying cloud-based financial applications for their future needs.
Takeaways:
The research highlights that SMBs face widespread concerns about macroeconomic trends, while simultaneously exhibiting optimism regarding revenue growth. Financial management challenges primarily center on staffing and data security, and SMBs rely on a combination of internal and external resources to tackle these issues. The adoption of dedicated financial management software witnesses clear inflection points, with cloud-based solutions gaining momentum. Moreover, as SMBs plan to increase spending on financial management software and services, their confidence and optimism about navigating change and achieving revenue growth also rise.
Conclusion:
SMBs face a rapidly evolving financial landscape marked by uncertainty and challenges. The findings from this research serve as a valuable guide for SMBs looking to improve their financial management practices amidst prevailing economic conditions. By leveraging dedicated financial software, embracing cloud-based solutions, and optimizing internal and external resources, SMBs can build resilience and drive growth in today's ever-changing business environment.
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