London – April 10, 2018:
For the first time, economic analysis by Sage and Plum Research has been applied to digital accounting, estimating it could save Small & Medium Businesses £17,000 per year, equivalent to getting 27.6 days a year back to focus on revenue-generating activities. The analysis has been undertaken as the Government makes plans to introduce Making Tax Digital, moving to keeping tax records digitally.
Alain Laing, MD, Sage UK & Ireland said:
“British businesses need support to become truly digital, so that they can focus on their unique products and services, serving their customers, and driving the UK economy by creating jobs and prosperity. Although we recognise that businesses have some questions around Making Tax Digital, we believe this research shows the huge benefits that will be realised as a result of digitising accounting processes. Our ambition is to make admin invisible for businesses so they can get on with doing what they love – running their business. With the right training, support and framework, we believe that Making Tax Digital will be instrumental in helping give businesses precious time back.”
Federation of Small Businesses (FSB) National Chairman Mike Cherry said: “The roll-out of Making Tax Digital needs to be seen as an opportunity to radically improve the small business user experience of HMRC. Done right, MTD could help streamline the process of small business tax compliance and therefore boost productivity. With MTD remaining voluntary for small businesses below the VAT threshold, research like this is needed to explain the benefits of taking part.”
The Office of National Statistics estimates that the UK productivity gap – the difference between output per hour worked pre- and post-the financial crisis – was 15.8% in 2016. This is the largest of all the G7 nations and almost double that of the G7 average published, at 8.8%. Sage’s research shows that only 59% of Small & Medium Businesses in the UK use digital software to help with their accounting methods, with around 18% continuing to use manual methods. When asked, users of digital software estimate that they save 2.3 days per month on accounting processes, equating to 27.6 days per year. Sage has identified the main perceived barriers for Small & Medium Businesses in moving to digital, including; lack of digital skills; concerns about the ease of use of; and the time it will take to acclimatise to new systems. Sage now predicts in real-time the estimated lost productivity to Small & Medium Businesses caused by administrative burdens on business. The Sage Productivity Tracker can be found at: http://www.sage.com/company/business-builders/reduce-your-admin-burden
Benefits were calculated as the number of days that Small & Medium Businesses can save by using dedicated software for accounting, as well as the potential increase in productivity across the UK economy. The starting point for this calculation was the results of a survey conducted by Impact Research on behalf of Sage (Tim Miller, Sarongrat Wongsaroj, “Sweating the Small Stuff – the impact of the bureaucracy burden”, Plum Research, September 2017). This survey asked respondents to provide an estimate of the number of days per month that using dedicated commercial accounting software would save. The results of this survey are shown below:
| Estimated time savings (days per week)
|% of SMEs
| No time savings
| 1 day or less
| 2 to 3 days
| 4 to 7 days
| Don't know
The midpoint of each range of time saving was used to calculate the weighted average number of days saved by using dedicated software for accounting. For the 18% of SMBs that responded to the question with “Don’t know”, it was assumed that their average time savings is equal to the blended time savings for the other 82%. Based on this calculation, the weighted average time savings per month for Small & Medium Businesses is 2.3 days. This translates to an annual saving of 27.6 days for an average SMB.
To calculate the productivity gain from adopting digital accounting, the total productivity loss due to administrative burden calculated in Sweating the Small Stuff – £39.9 billion per annum – was used. This implied loss would be expected to be reduced by over £7.5 billion per annum if the SMBs were able to save 27.6 days of administrative time and spend them on more productive business activities and generate revenues. This represents an average productivity gain of nearly £3,000 per SMB.
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