Failing to plan is planning to fail in business

SMEs are integral to the present and future of the Australian economy. They employ 70 per cent of the Australian workforce, contribute $5 billion a year to research and development and consist of 99.7 per cent of actively trading businesses across the nation, says the SME Association of Australia. But there's a problem of endurance.

Using Australian Bureau of Statistics data, accounting software providers CCH demonstrated that more than half of all Australian businesses do not even survive their first four years. Is it a poor economic environment? Bad employees? A bit of everything? What is the cause of all this insolvency?

A matter of trust

Who do you trust more – your gut instinct, or your accountant? CCH showed that Aussies SMEs seem to have a very cavalier attitude when it comes to their business, with 70 per cent of those interviewed considering their gut to be more accurate than any kind of professional advice.

On top of that, only 26 per cent considered failure in seeking small-business business advice to be the cause of their business insolvency. While it's certainly admirable to be able to manage on your own, Australian enterprises seem to overwhelmingly undervalue business advice.

However, what about the other side of the story? In a different survey that instead asked the accountants about SME failure, the professionals ranked poor business models as the real reason for SME failure. While the average business owner has been trusting their gut to drive their business in the right direction, accountants have been lamenting over outdated, inefficient or downright incorrect business models.

So who is right?

Clearly, there is some disagreement as to why small enterprises survive for such a short time.

Unfortunately for SME owners, it looks like the accountants have got the right end of the stick. The Australian Securities and Investments Commission named poor strategic management of business as the second most common reason for insolvency, just below poor money management. So failing businesses are falling apart because of poor money management and a lack of planning.

The solution

The saddest part of these statistics are that these issues are so easily resolved. Seeking the right local advice for your Geelong business has never been easier, whether it's accounting or business planning advice. Don't rely on the rumblings in your tummy to guide your business, seek out a professional accounting firm like WMC Accounting today.