Top 5 Issues Facing SMEs in Ireland

SMEs face many issues on a daily basis. The Big Red Cloud Business Sentiment Survey in March 2018 revealed that SMEs face major challenges when it comes to development. The survey compares the results to a previously completed survey 2 years ago to find which problems have become more of a concern. The survey found that the following were the top 5 issues that SME’s faced:

• Regulatory and Compliance Issues
• Lack of Government Support
• Taxation
• Staffing
• Access to Credit

You can find the full article from Big Red Cloud here.

The survey identified access to credit as the biggest issue that SMEs face, and while staffing had the lowest percentage it was still a considerable challenge at 13%. Here we will be discussing these 5 issues in further detail and suggesting some of the things you can do to combat them. Small businesses owners will face many challenges in the day to day running of the business but some of these issues are either avoidable or fixable.

Regulatory & Compliance Issues

From revenue issues, as we’ll discuss below, to new regulations such as the GDPR, the goalposts for being compliant with the law are constantly shifting and can be complex. Company laws effect absolutely every aspect of your small business. Consumer laws effect your interactions with your customers. Employee rights and laws effects how you deal with your employees. Health and safety regulations effect your building and your products. Some of these are important and necessary regulations, but for small business owners it can feel like you’re jumping through hoops as you try to make sure you’ve complied with every single regulation. However, how can you be sure you haven’t missed one?

Unfortunately, there’s no simple fix to this problem. As a business owner it is your responsibility to make sure your business is compliant and that it follows regulations. Bigger businesses often have specific employees employed to monitor this, but failure to comply can be both costly and time-consuming. Thankfully the SFA offer expect advice and a few practical guidelines to help you. They have downloadable pdfs on a range of topics including consumer and competition law. These documents go into detail about exactly what these laws entail and your responsibilities regarding them. For example in the Consumer Law guideline the SFA outline The Sale of Goods and Supply of Services Act 1980, and under this act, when the buyer is entitled to redress. You can find all of the SFA’s advice on regulatory and compliance issues here.

Lack of Government Support

With all the red tape surrounding starting and running a business; is it any wonder that businesses feel that there is a lack of government support, especially with regards to financial aid? There are, however, over 80 government supports available for SMEs. Unfortunately, these supports are specific to different types of businesses and require a slew of information in order to be applied for.

Thankfully Supporting SMEs has an online tool for figuring out which of these supports your small business could be eligible for. All you need to do is answer 8 simple questions. You can find this tool here.

Depending on your business size, industry, and location, the supports vary. An example of a support you could be eligible for is the Shop Front Improvement Scheme which applies to retail premises. Once you’ve figured out which supports you’re eligible for, take a trip down to your Local Enterprise Office for further advice and guidance. There is support out there, it’s just about knowing the right places to look for it. In the absence of financial support from the government, another option is to look at a cash advance as a financing option. A cash advance loan can allow you to access up to €500,000 and can be approved within 24 hours. That’s much faster than a government support would ever be approved.

Taxation

Taxes are a certainty in all aspects of life and business is no different. Depending on your business structure and activity, different taxes will apply. Two examples of taxes that you may have to deal with are:

• Capital Gains Tax: If you are planning on passing your business on or selling it for a profit this tax will suddenly become very relevant to you. Capital gains tax is a tax on gains arising from the sale or transfer of assets. Therefore, a CGT charge may arise for you if you sell or transfer shares in your private company and that sale or transfer results in a gain. Similarly, you will need to consider CGT implications if you sell or transfer assets of your unincorporated business.

• Income Tax: Income tax is chargeable on the taxable profits earned by individuals operating as sole traders or in partnership. Taxable profits are not the same as accounting profits and different rules can apply. If you operate through a company, any payments that you receive from the company, whether in the form of dividends/distributions or salary, will be subject to income tax. Income tax applies at the standard rate of 20% up to certain limits and 41% on the balance.

For a more detailed explanation of the various taxes that apply to businesses you can check out the Irish Tax Institute guide here. 

Business taxes in and of themselves aren’t really the problem for small businesses; rather it is the stress, time commitment and organisation that is necessary to complete all the taxes involved in running a business that are the problem. Managing reports and tracking expenses can often be left to the wayside when you are busy running your business, thus when it comes to completing your taxes, the scramble to get this information is pretty much impossible. There are however, some easy fixes to this problem. You can install programs such as Expensify to track your expenses and keep thorough records so that, come the end of the year, it is not such a struggle and scramble.

That is, however, not the only stress associated with taxation. Unless you are a trained accountant, you are likely to be confused by which taxes are necessary, what refunds you can apply for, and generally worried that you’ll file your taxes wrong and have to pay huge amounts in arrears. While it may seem like the cheaper option to file your own taxes, sometimes hiring a professional really is the better option. This means that you are less stressed, and it frees up your time to do what you do best; run your business. Plus, an accountant may even be able to get you a better refund than you could’ve got yourself.

Staffing

Staffing is a growing issue for many SMEs. Speaking at the Small Firms Association (SFA) Annual Conference 2018, Sven Spollen-Behrens (SFA Director) stated that “The tightening labour market is very challenging for SFA members as two-thirds look to recruit over the coming year.” Hiring and maintaining employees can be a major issue for small businesses. The cost of hiring and training new employees alone can be a huge drain on a small business’s finance. Most small businesses can only afford to employ a certain number of employees and so it is important that these employees are both talented and engaged.

Employee engagement is the key to productivity in business; and there are various ways that you can ensure that your employees feel valued and remain engaged. Not only does employee engagement help productivity but if your employees are “engaged and thriving”, according to Gallup (the U.S., researched based, global performance management consulting company) they are 56% less likely to look for a job with a new organisation in the next year.

You can engage your staff in simple ways such as having some sort of recognition scheme for good work; like an ‘employee of the week’ initiative or even just organising social events for employees. You should also encourage your staff to attend relevant training and events. Not only does this improve the skillset of your staff, but it proves to them that you are invested in their future with the business. The 'What Workers Want 2017' report shows that career progression and development opportunities are more important to staff than benefits and brand names. An SME employer is often in a better position to offer these opportunities and leverage them for staff retention than a larger multinational corporation.

Access to Credit

The main problem SMEs face in Ireland is trying to get access to credit. Money management is a huge issue for small businesses. Being able to manage cashflow and have the money to make necessary or desired changes can be an ambitious goal for SMEs. Small business owners are constantly faced with issues such as unexpected outgoings, outstanding bills, and clients stalling payments. Issues getting money from your clients is never an easy situation but, an easy solution to this problem is to consider invoice financing.

Invoice financing allows you to access a percentage of the money owed straight away. While banks can require a long history of trade and obvious profits; alternative lenders are often more flexible. This flexibility makes it easier for start-ups and SMEs to access credit. For example, for some of GRID’s cash advance facilities you only need 12 months of bank and merchant statements for approval. With a cash advance, a business can borrow up to €100,000 and this amount is paid back as a portion of the business’s daily credit/debit card sales. This means that the repayments are flexible and fluctuate at the same rate as your business. As well as this, unlike banks, which take an average of 6 weeks for an ‘initial’ decision; GRID can approve your request within 24 hours.

With all of the advice, supports, and options that are available soon your small business will be running smoothly. When you’re less tied up in some of these bigger issues, such as staffing and compliance, you’ll have more time to focus on the finer details of your business. When your taxes are in hand, and you have a handle on your cash flow; then you’ll have more time to focus on the little things. Do you agree that these are the top issues that SMEs face? What advice would you give business owners who are facing these issues?