SMBs Struggle To Set Flexible Spend Goals, Research Finds

Two forces are currently at work that may stand to reshape the way small businesses (SMBs) manage their cash.

On one hand, finds the latest report from spend management firm Center, companies are eager to take a new approach to how they budget and handle costs.

On the other hand, separate research from the 2018 Robert Half Salary Guide for Accounting and Finance Professionals finds that the corporate accounting talent pool is shrinking, forcing the enterprise to rethink its employee hiring and management strategy. The Guide found that as the talent pool shrinks, companies are increasing salaries with a prime focus on retaining the accountants they have and becoming more flexible in their employee hiring requirements to focus on certain skills and onboard professionals willing to take on extra training.

More than half of professionals surveyed regarding employee management said they had wasted time hiring and onboarding someone who ultimately wasn’t a good fit for the company, while 53 percent said such bad hires led to increased stress levels on the rest of the staff. More than a third said bad hires increased stress on management, and 20 percent said the bad hire reduced confidence in management’s ability to make good hiring decisions.

According to Center Co-Founder and CEO Naveen Singh, businesses today continue to struggle with manual budgeting tools. While organizations are in need of a better way to handle cash, a shrinking talent pool of accountants, coupled with some SMBs’ desire for “business analysts” over accountants, may encourage companies to turn to tech — not talent — to keep up with growing needs.

“Our survey findings prove that today’s commonly used but outdated budgeting processes can’t meet the ever-changing needs of the organizations they service,” said Singh in a statement announcing the research last week.

“Without real-time visibility into spend, budgets are merely static documents instead of the dynamic plans needed to manage cash flow and support and organization as it evolves,” Singh continued. “As the data clearly shows, the market is ripe for new solutions to help budget managers and employees meet their goals and ultimately strengthen a company’s bottom line.”

Nearly two-thirds of professionals surveyed told Center that they have gone over budget at least sometimes, with analysts pointing to a lack of transparency as a key factor behind this mishap.

And while budgets must be flexible and reflect the ever-changing positions of corporate finance, most survey respondents (55 percent) said their companies set budgets only once a year.

“Budgets set annual fail to respond to the agile nature of today’s businesses and are often out-of-date within a few months,” Center said in its announcement, adding that 86 percent of surveyed executives said they do not adjust their budgets periodically.

Interestingly, smaller businesses with fewer than 50 employees said they are more likely than larger corporates to establish a flexible rolling budget.

Need for New Tech

Center pointed to the ongoing use of outdated solutions to set budgets and manage spend as a significant factor that leads to a lack of insight into spend management and the threat of going over budget.

For SMBs, discretionary spend — the spend that doesn’t include fixed and predictable costs like payroll and rent — makes up a quarter of company budgets, researchers said, offering “the biggest opportunity to impact the bottom line when businesses look to cut expenses, manage cash flow or track P&L targets,” Center stated. Tracking discretionary spend is complex, however, and companies aren’t equipped with the right budgeting software tools to do so.

According to the report, 88 percent of businesses surveyed said they don’t use budgeting software at all. Forty-three percent said they use “passive documents,” which are documents that require manual updating, including Excel spreadsheets, as their primary tool to track budgets.

Smaller companies rely on these manual tools more than larger organizations, the report noted.

“While manual, time-consuming processes are widely used, the findings point to a major opportunity to adopt more agile business solutions and processes that promote strategic, flexible spending and meet the changing business needs of small to medium-sized businesses,” Center concluded.