It’s a story as old as the hills: administrative overhead is throttling business and preventing growth. However, research commissioned by Sage shows it might be especially true in today’s world – and potentially devastating to business growth.
The Sweating the Small Stuff report, created by Plum Consulting on behalf of Sage, analyzed research carried out with 3000 small and medium-sized companies across 11 countries. It found that, on average, small businesses currently spend 120 days a year on admin.
The admin load varies by country and the report reveals that this can translate to the equivalent of a full-time member of staff within US businesses simply to deal with administration and regulatory requirements.
Even in Ireland and Australia, which the research indicates have the lowest admin burden, there’s still a requirement for the equivalent of one-quarter of a member of staff simply to deal with admin rather than focusing on the core aspects of the business.
Productivity costs unveiled by the research are also incredible. Measured as a loss in productivity, the report estimates a US$335.3 billion cost in the US. And an estimated £39.9 billion in the UK.
Splitting the load
The report identifies two kinds of administrative burdens: operational, and regulatory. The latter isn’t required for the success or otherwise of the business but is required by governments to register or monitor it.
The admin burden breakdown is as follows (taken from Table 3-1 within the report):
For example, business departments like Human Resources (HR) are typically hit by both operational and regulatory administrative requirements as they seek to produce results that are good for the business – but that also comply with government legislation intended to protect and provide rights for employees.
Some administrative sinkholes are entirely regulatory in nature, such as the requirement to pay taxes.
However, the report does not just identify the problem of administrative sinkholes. It also recognizes the best possible solution – and provides data to back up the assertion.
The report asked to what extent the businesses surveyed have applied technology across eight core administrative tasks likely to be found in virtually all businesses. The companies were invited to choose from three possible answers – Fully, Partly or None – and from this a “digitization score” was produced.
The results should come as no surprise. Businesses with a higher digitization score had lower admin costs, expressed as a percentage of turnover.
Nowhere is this clearer than within the largest of the administrative tasks: Accounting. By applying digitization, the cost as a percentage of turnover can be reduced significantly, as is demonstrated by Figure 5-7 within the report:
Many businesses might think they have already applied digitization. After all, it is rare for every employee not to be provided with their computer nowadays. However, while this kind of digitization was revolutionary when it began in the 1980s, in recent times there’s been a second revolution – and one that’s every bit as important. It pushes the admin sinkhole cost savings even further.
With this in mind, let’s look at ways to fill-in to apply even smarter digitization – and in doing so, fill-in those admin sinkholes.
Choose integrated software: Only those living under a proverbial rock will not be aware of the masses of business software out there. However, a lesser-known fact is that not all software is created equal when it comes to integration – that is, accessing sources of data outside of itself, or different systems.
For example, there’s a profound time and labor-saving benefit for an accountant who’s able to send a client’s tax statement to HMRC with the click of a button, within the software they are already using for their general accounting. The earlier computing revolution certainly sped things up compared to posting pieces of paper to HMRC, but nowadays it sounds positively antiquated to talk of processes where you might output a report as a file, visit the HMRC website, and manually upload it!
Even more than this, however, software that provides a single access point and shared data across all departments saves time and effort. A payroll run that will be reflected instantly within the accounting side of the software means there’s no need to spend time exporting or importing data – and no need to stress about the fact the many different systems might not be in sync.
Go mobile: The modern business computing revolution can be found in your pocket or bag. It’s a revolution that most of us have already accepted in our personal lives yet many just haven’t made the connection that it can also be applied to business. We are talking here, of course, about mobile technology like iPhones or Android devices, along with their slightly larger brethren in the form of tablet computers. Apps and the cloud computing services they rely upon are used by the smartest businesses because they encourage more rapid growth — and that is before we discuss the basic time and efficiency savings.
Fundamental to this is cloud computing, which provides always-on access to data, and access from anywhere and using virtually any device – whether that is a PC in the office or a tablet computer in a coffee shop. Compared to the earlier computing revolution that, while incredible at the time, also ultimately chained us to a single desktop computer within the four walls of an office.
The physical freedom of using mobile devices increases merely the opportunity to perform admin tasks when it best fits your schedule or needs. For example, emails can be answered on the way home on the train. Schedules can be drawn up as you grab a coffee before starting work. VAT returns can be filed from a motorway service station on the way somewhere! There is no limit in that virtually everything you previously did on a desktop computer can now be done using apps, wherever you happen to be.
Embrace the future: The introduction of mobile accounting apps brings more than just convenience and time-saving. Technology is ushering in different kind of accounting processes for clients, at least – and the only reasonable response is to embrace this. For example, mobile apps bring with them the ability to make instant payments for services, as well as track purchases by simply snapping a photograph of a receipt.
What this means is the age-old concepts such as double-entry bookkeeping is no longer relevant to clients. Invoices can be generated and paid instantly, so there’s no need for clients to have an accounts receivable department or to discuss interest accruals.
A key feature is that clients nowadays expect and demand this kind of convenience – and accountancy firms can respond with their own integrated software that can keep up.
Sweating the Small Stuff: The impact of the bureaucracy burden
Every minute a business owner has to spend on admin and bureaucracy takes away from the chance to make their vision a business reality. How does this cost bear out and how can a business owner overcome it?