More than 3 million SMEs in the UK still not using accounting software study finds

Despite unprecedented growth in eCommerce during the pandemic, millions of small businesses are still stuck in the past when it comes to accounting. That’s one of the findings of the latest research report from Codat, the API providing connectivity to financial software used by small businesses globally.

Codat’s research shows that since the pandemic’s start, there has been an explosion of new business registrations and a cultural shift towards enhanced digitisation, forever impacting the accounting software market. Specifically, since July 2020, the UK experienced the largest increase seen in eCommerce with their small-to-medium enterprises (SMEs) growing by 100,000 to 6 million in total.

What’s most surprising is that not all of these businesses use accounting software. The report estimates that “50% of businesses in the UK have adopted accounting software and the remainder use a combination of Excel spreadsheets and manual records.” That means that more than 3 million SMEs in the UK aren’t using accounting software.

With a plethora of accounting software options available, the question remains, why are SMEs not taking advantage of these solutions? One study from Capterra that interviewed over 400 self-employed individuals and SMEs from various industries and sectors found that freelancers and companies with fewer than five employees view spreadsheets and manual methods as sufficient.

While it may not be an issue right now, it will become one down the line as the company grows and more data needs to be recorded efficiently. Tasks such as uploading and downloading data and checking the accuracy of the work become increasingly cumbersome and consume valuable time. The Capterra study found that, in general, the top three challenges that SMEs are currently facing when it comes to accounting are: lack of time (45%), difficulty keeping up with new regulations (20%), and lack of knowledge (19%).

Both studies observe that a cloud-based accounting solution mitigates these challenges by managing the entire accounting process from start to finish.

Cloud-based software is vastly different from traditional accounting software, which is installed on a single computer. With a cloud-based accounting solution, documents are stored online, meaning they can be accessed anywhere at any time using any device with internet access. This allows for an unlimited number of users to collaborate simultaneously, with the data being securely stored and encrypted and the software itself always up to date.

SMEs can also connect their cloud-based software to online payment platforms, allowing them to get paid on time (e.g. setting up automatic payment collection from recurrent customers).

While bookkeeping can be tedious, cloud-based accounting solutions can save SMEs time by managing their bank transactions (e.g. importing bank transactions every business day, eliminating the need to manually enter this information). Data can even be extracted automatically from bills and receipts with certain apps.

Cloud accounting improves business efficiency with time-saving features such as employee management, reporting, expense management, financial monitoring and so much more. This type of software helps save SMEs both time and money, both of which are priceless commodities in today’s world.