The Top Accounting Challenges Faced By Small Businesses


The world of small businesses is one that is competitive, dynamic, and not without its fair share of roadblocks and challenges. Therefore, it does not come as a surprise to hear that efficiently managing accounts might not always be on the top of the priority list for business owners. Smaller companies often find themselves focussing on more revenue-generating areas like acquiring new business, and leave this role to a part timer or external accountant who is not part of their operations.

However, accounting is fundamental to overall business success, regardless of the size of the company. In fact, it can be said that small businesses are faced with a set of challenges that are not necessarily experienced by larger companies which already have more advanced business financial management software and systems in place. In this article, we outline some of the key accounting hurdles a small business may face and how they can be overcome.

Cash Flow Management

The Australian Securities & Investments Commission found that the leading cause of company bankruptcy in Australia is inadequate cash flow. 51% of reported insolvency cases cited this as the reason behind business failure, with small to medium size businesses making up the vast majority of those affected. Cash flow considerations are an aspect of business that must be carefully attended to by accountants and business owners alike.

To circumvent the cash flow conundrum before it’s too late, businesses must make an effort to improve the efficiency of not only accounts receivable and accounts payable (ie. invoice promptly and be proactive about collecting payments), but also keep a close eye on the health of their new business pipeline. In this area, manual processes will only get one so far. Ensure that you are on the ball with metrics like projected inflows and past-due invoices by embracing the advantages of automation to send reminders to customers, and notifications to your team when things are off track. Making use of an efficient small business management software can be indispensable in these scenarios.

Tracking & Planning Expenses

Monitoring cash inflows is only one half of effective cash flow management – the other half lies, of course, in effectively tracking and planning business expenses. When it comes to keeping on top of your expenses, a golden rule is that no transaction should go unrecorded; that is how errors and miscalculations creep into the books, not to mention a misplaced sense of financial confidence.

Record your transactions as soon as they take place and keep the receipts and invoices on file accordingly. To avoid getting lost in a mountain of receipts and endless hours sifting through paper, invest in a digital cloud-based platform where you can not only store expenses and invoices, but do so together with your sales and delivery information. This will allow you to easily track profitability and overrun versus your original estimates.

Then, when it comes to the planning of the budget, you should have more information to leave enough wiggle room for when unexpected expenses arise. Unplanned expenses can hit small businesses particularly hard as they tend to operate with limited capital compared to bigger companies. Therefore, it is imperative to take the appropriate measures to understand your costs, and draw up contingency plans (eg. exploring emergency lines of credit) if you feel like cash flow might be a temporary issue.


There are an estimated 300 million payroll transactions each year in Australia. Payroll comprises not only of putting salaries into employees’ accounts, but involves the computation of hours, tax reporting, superannuation obligations, and more. Needless to say, it is quite a complex aspect of business and accounting operations, and yet many small businesses still execute payroll processes manually – a conundrum that eats up time, resources, and leaves an unwanted margin of error that can lead to dire – and costly – legal consequences.

For small businesses, it is crucial to take some of the pressure off those shouldered with quality payroll software, but also not forget that often one of your key personnel costs may actually be non-employee contractors.

While accounting and payroll systems can offer timesheets and PAYG summaries with the click of a button, it is essential to also have systems in place for onboarding, offboarding, billing and time tracking of your contractor workforce. If poorly managed this can be not only a major source of cost overrun, but also a huge administration burden. Being able to rack up costs against your sales and project estimates to determine profit and loss, regardless of source, is a valuable attribute to look for in your business management software.

Crush Your Accounting the Clever Way with Clevero

While challenges are part and parcel of venturing into the world of business, having headaches when managing cash flow doesn’t have to be part of your business norm. Overcome these roadblocks with the help of an effective small business management software that can track, facilitate, and automate the main bulk of cost and expense management, leaving you with the space you and your employees need to tackle other areas of growth in your business.

Clevero is a fully customisable business management software with a wide range of features aimed at aiding and supporting small businesses. Want to find out more about how our small business software can help you? Speak to our friendly team today!

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