Xero, on-line accounting software for small business released its Xero to Sixty Report which examines the relationship between U.S. small businesses and their accountants, especially with respect to their attitudes toward tax season. Russ Fujioka, president of Xero U.S. said, “At Xero, we keep a pulse on how accountants and small business owners are doing, and how they’re interacting with each other - where their attitudes and experiences are in sync, and where they differ…”
I have taken the liberty to review the findings of the survey, and put a little ‘Accounting Software Consultant spin’ on them as my personal ‘take away’. I must say that I found this survey very informative and well written (and illustrated). You can look at the full report here.
Key findings of the report, conducted by Dimensional Research1, included:
- Accountants recommend that business owners talk to them more often,
- Economy had biggest impact on small businesses in 2014, and is perceived the same for 2015;
- Tax season is not very dramatic for small business owners; and
- Politics and gas prices are having significant impact on small businesses.
Bolstering communications is a key
It would seem that the solution for many small business problems recognized at tax time could be resolved with more frequent communications between business owners and their accountants. While only 45% of small business owners talk to their accountants on a monthly basis, almost 70% of accountants recommend that their business clients should communicate with them monthly. In reality it seems that 1/3 of small businesses only talk to their accountants at tax time.
The survey also showed that rural accountants have more problems with their small business owners communicating than do accountants in urban areas. Forty-seven percent of rural businesses responding talk to their accountant “only at tax time.” From an Accounting Software Consulting perspective, you might have the opportunity to provide services to rural small businesses on an on-going basis easier than to businesses in urban areas.
One thing I found interesting was just how close accountant’s and business owners scored in reference to fundamental accounting related tasks. Business owners (by 43%) outscored accountants (at 42%) as to the importance of ‘up-to-date’ financial records. Business owners viewed the use of ‘cloud based accounting solutions’ important at 14% in contrast to their accountants at 12%. Another area of commonality was the importance of timely invoicing, both groups weighed in around 35% (+/- 1%). It seems small business is recognizing that is just as important to invoice their customers as accountants invoicing their clients. One area that shocked me was on the topic of ‘financial goal setting’; business owners viewed the importance of this at 38%, while accountants viewed the importance at only 26%. To me, this demonstrates another area in which Accounting Software Consultants can reach out to small businesses and offer business planning, revenue projection and other services based upon data and business analysis.
Economy continues as source of major impact and concern
More than half (52%) of all small businesses surveyed said the economy had the most impact on their business during 2014. Even a slightly larger percentage (53%) believe that it will also be the top challenge for their business during 2015. Forty-one (41%) percent of the small businesses responding indicated that the Affordable Care Act (aka: ObamaCare) had a major impact on them during 2014. More than twenty-percent of accountants view rising minimum wages as a key challenge facing their small business clients in the year to come.
It’s hard not to believe that the overall economic conditions of 2014 impacted small business, despite the various projections, preliminary reports, upward and then downward revisions that the government has thrown out in 2014, almost everyone recognizes that economic growth has been slow, and that in many areas and sectors it has been minimal. Of course, the reduction in gasoline prices (which are discussed below) has reduced costs, and provided a boost for non-energy sector businesses; however, for the Oil & Gas sector the devalued cost of a barrel of oil is creating reductions in labor, production and exploration.
More than half of the business owners in the survey believe that the economy will still be their primary challenge for 2015. Additional costs associated with regulatory burdens, and legislative enactments will impact their overall performance. Costs for new technologies including offering or making use of cloud or mobile resources will further impact the bottom line, while difficulties with raising capital will restrict operating resources. Cloud-based Accounting Solution Advisors may actually find that small business concerns over the cost of migrating to newer technologies might actually be diminished using the Software-as-a-Service model, rather than traditional software purchases.
Early results from 2015 lead a majority of owners to indicate that they were not yet seeing any improvement in their business over last year, and in fact 18% of respondents indicated that their business was actually worse thus far this year.
Most Small Businesses find Tax Season blasé
Nearly three-quarters (73%) of small business owners say they “will simply get back to normal after taxes are complete” and forty-six percent of businesses responding said they really didn’t “mind doing their taxes.” Even 54% of accountants indicated that life would soon be back to normal just as soon as tax season was over. Interestingly enough, 43% of accountants will spend more time with their family, but only 33% of business owners will have time to do the same.
Just goes to show how much time a small business owner must devote to his business if he wants to make a go of it. And that principle applies to Accounting Software Advisors as well; don’t think you can rest on your laurels after pre-tax accounting file clean-ups are over, there is plenty to keep you busy the rest of the year. If those accountants are home with family rather than visiting their clients, you have a golden opportunity to get your foot in the door to provide those ‘trusted advisor’ services that blend your accounting software skills with more sophisticated analytical solutions to help those clients get all the data they want on budgeting, revenue projections and identification of cost-controls.
Elephants, Donkeys and Gasoline
Nearly fifty-percent of business owners in traditional Republican (Red) states think that a majority of their favored party in both the U.S. House and U.S. Senate will benefit small business. Only a quarter of business owners in traditional Democratic (Blue) states believe the same way. Seems like the Elephants and Donkeys no more agree out ‘in business land’ then they do in their Washington domiciles.
Interestingly enough, when the group as a whole is asked about the effect of a Republican majority, 42% thought it wouldn’t make any difference at all. It appears that the vast majority of small business owners believe that those guys in Washington never do anything but ‘run for office’.
There is one thing that a majority agree on, for the most part, lower gas prices are impacting their small businesses positively, and as a result a little more than 1/3 of businesses are investing in their infrastructure, 17% are adding personnel, and 16% are expanding their business operations in other ways. Since 36% of these businesses indicated that they would be investing in infrastructure, all you Accounting Software Advisors have an ‘open invitation’ to guide these business owners in solutions that will best fit their needs, pocketbooks, and expectations.
Reference and Source: All statistical measures and specific outcomes adapted from “The Business of Small Businesses – A Small Business Owner and Accountant Survey" by Dimensional Research, March, 2015 – Sponsored by Xero.
About the survey: Dimensional Research was commissioned by Xero to survey 603 participants: 300 U.S. accountants that work with small businesses and 303 U.S. small business owners. The primary research goal was to understand attitudes and experiences with finances and taxes for business with 20 employees or fewer. This survey was conducted between February 18, 2015 and March 4, 2015.