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Small businesses spend one month a year untangling red tape

small business red tape

The time SMEs spend on banking and accounting is costing the Australian economy almost $7 billion annually.

The Tyro SME Banking Report found that 44% of Australian small- to medium-sized enterprises (SMEs) spend more than three hours each work checking, entering, paying and reconciling data, which equates to four weeks' productive work time each year. The extra time spent costs each business an average of $7,800 a year and the Australian economy $7 billion annually.

The report outlined seven key "pain points" for SMEs which included payroll functions, reconciliation of banking statements and applying for and securing working capital. According to the report, 700,000 businesses (35%) of SMEs believed their bank could be doing a better job.

"SMEs have to work the equivalent of a 13-month year or give up what amounts to four weeks annual holiday to compensate for banking inefficiencies," said Tyro's CEO Jost Stollmann.

“Large companies, with more than 200 employees, make up only 0.3% of businesses operating in Australia. By comparison, small and medium sized businesses are the creative and innovative heart of the Australian economy, generating more jobs than any other sector."

Securing working capital is an ongoing concern for those in businesses of all sizes. Tyro's report found that larger SMEs are three times more likely to spend two days or more applying for and securing working capital than smaller enterprises.

The business loans market is unsuitably skewed towards larger enterprises or businesses that are able to provide security for business loans. Speaking to The Australian, the chief executive of the Council of Small Businesses of Australia Peter Strong says this is due to a compliance burden put on banks by the Australian Prudential Regulatory Authority. This makes it easier to apply for a personal loan than a business loan of the equivalent amount.

Stollmann says the key to business banking improvement lies in innovation.

“Banks now see SMEs as core to their business. Australia should be looking at action to improve SME productivity, in recognition of the changing terms of trade and resources decline. We should help SMEs operate more efficiently," he said.

“The winners in the business banking of the future will marry deep technology and banking know-how.”

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