Manual processes are expensive for small businesses, in both time and money. Taking time to crunch numbers or hand-pick data is a waste for SMB owners, for sure. But a new report from cloud accounting firm Sage has put a price tag on this burden: a whopping $600 billion for firms across the globe.
Sage’s latest report, “Sweating the Small Stuff: The Impact of the Bureaucracy Burden,” includes research conducted by Plum Consulting, who surveyed more than 3,000 decision-makers at SMBs across the U.S., Canada, U.K. and elsewhere to assess how these companies are using time and company resources on administrative tasks.
That $600 billion price tag represents the financial loss within the economies in which small businesses operate, as administrative tasks – including accounting, payroll, invoice processes and more – impact the ability of small businesses to contribute to their nations’ overall economic health, Sage explained.
The U.S. is by far the hardest hit from small businesses spending too much time on manual tasks. With the average small business losing 4.9 percent of its time to manual administrative burdens, that totals up to $335.3 billion in lost in productivity, Sage found. Brazil sees $79.5 billion in missed gross value each year due to 6.5 percent of time lost to administration, and the U.K. sees $39.9 billion due to 5.6 percent of time lost.
Sage warned that the actual impact on the economy could be worse than what’s estimated.
“This calculation is likely to underestimate the impact on the economy,” Sage wrote in its report. “Any direct growth in output from SMEs is likely to have significant multiplier effects across the economy – from the increased spending on raw materials used in the additional output to the spending of increased profits to potential cost savings for customers if the increased efficiency is passed on through a reduction in price.”
If these small businesses were able to increase productivity by a few percentage points, Sage noted that it could lead to substantial increases in gross value add.
“This increase could be partially achieved through the reduction of time spent on business administration,” Sage explained in its announcement, adding that overall, businesses spend between 230 and 240 days every year on administrative tasks – which encompasses 17 percent of total manpower. “This represents a significant opportunity for team members to spend more time on business projects and less time on administration,” the company added.
Researchers found that the largest administrative burden for SMBs in the U.S. is accounting, which comprises nearly a quarter of all administrative tasks. Recruitment, HR and other operational tasks also account for significant portions of time spent on administrative tasks.
There is evidence, though, that businesses are beginning to understand the need to automate key processes of the enterprise, such as SMB accounting. Nearly a third of SMEs surveyed by Sage said they have fully digitized the accounting processes – still, nearly half say they have no software solution in place.
Software and other technology can automate processes that lead to a reduction in operating costs and increase the available manpower used for productive tasks, analysts noted. But Sage also explained that each company is different and holds a unique position when it comes to the digitization process, and therefore there can be no standardized way to approach digitization in order to reduce administrative costs. Overall, though, Sage said there is a general reduction in costs as digitization increases.
Small businesses must overcome various obstacles, such as the time and money needed to invest in digitized administrative processes, the burden of planning for implementation, lack of skills and expertise in automated and digitized solutions, and overall apathy for change in the enterprise, Sage’s report noted. But for businesses and overall economies to thrive, they must overcome these hurdles, said Stephen Kelly, CEO of Sage, in an introduction to the report.
“Reducing this [administrative] burden is in all of our interests – it doesn’t just serve to save small business owners from the drudgery of admin,” the executive wrote, adding that reducing administrative burdens can help startups survive longer and scale up, and address the “productivity puzzle” that impacts economic growth. “We believe that digitization is a critical enabler in reducing the burden of admin,” Kelly said.