Procurement · 12 January 2016

How archaic office systems hold back many small firms

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One in five small business owners still run operations using just a pen and paper

Inefficient and costly back office systems remain a significant factor holding back small businesses according to new research, with one in five owners still running ventures using nothing more than a pen and paper.

Data collected by Worldpay has found that inefficient systems have left 48 per cent of UK SMEs unable to identify top customers and their purchasing habits, whilst 62 per cent couldn’t identify top selling products. Almost two-thirds of SMEs could not identify the busiest trading day of the year, whilst 40 per cent weren’t able to provide revenue or profit forecasts.

Encouraging firms to think more seriously about shifting to electronic platforms, partner at law firm Whittingham Riddell, Duncan Montgomery, commented: “These statistics are shocking. A properly set up system can deliver top ten customers in about six seconds, together with high and low performing products, what credit notes have been issued and so on.

“Once a business gets to a certain size the owners cannot run it manually and the lack of systems improvement costs the business and the owner money and time.”

In a separate study, 77 per cent of small firms were found still to be storing and managing paper records, with 19 per cent stating that all records were kept in paper format. Almost two-thirds of businesses reported that data was stored in both paper and electronic format.

Conducted by the Sage Small Business Panel, a survey of nearly 400 small firms discovered that mobile device use and an increasing need to access data anytime anywhere were major factors impacting the way businesses store and manage information.

Director of UK Business at information solutions provider M-Files, Julian Cook, believes firms need to do more to avoid “content chaos”, and ensure easy, synchronised access to business systems so that workers don’t waste valuable time each day.

“The transition from paper to electronic document management has not solved the issue of being able to quickly find the information we need,” he said.

“All too often companies have just migrated their existing paper filing systems into digital form, and as a result are still suffering from the same drags on productivity.”

The vast majority of small firms were found to be considering switching to electronic platforms because of a need to improve operational efficiency. Lack of storage space was cited by 84 per cent of firms as a key reason to make the change, whilst 50 per cent felt the need to reduce overall costs.

In total, 95 per cent of small firms said that regulation and compliance required the safekeeping of paper documentation for several years.

“What is needed is a new way of thinking and creating more effective systems to store and manage data,” commented director of European Business Development at Sage, James Beard.

“Small businesses are aware of the productivity gains that can be made migrating to electronic document management, but without a strategic approach in place for more effectively managing information, they often replicate the same inefficient processes.”

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ABOUT THE EXPERT

Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.

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