Shocking way one quarter of Aussie businesses still operate

One third of all Australian businesses are still operating without basic accounting software. It’s costing them time and money - and they’re risking breaking new ATO rules.

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New ATO rules mean all small business owners will soon have to change the way they pay their staff. Many of them aren’t ready.

Nearly a quarter of Australia’s small businesses are operating in the dark ages and not using accounting software, new research shows.

The ‘In the Zone’ research, commissioned by Reckon, has found that these businesses are struggling with the weight of administration.

On average, small business leaders are spending up to a fifth of their working day solely on administration, according to the study of 1300 small business leaders.

“The data was quite staggering. Ten hours a week of admin or payroll is a massive amount. That is one working day a week,” said Sam Allert, CEO of accounting software company Reckon.

“Whether they are a carpenter or a baker or whatever, they are spending more time doing that than actually ‘getting in the zone’ or operating at their peak.”

The administrative burden will change for over 750,000 Australian businesses with 19 employees or less when Single Touch Payroll regulations are extended to include them on July 1.

Touted as the biggest shake-up to the sector since the Howard Government’s Goods and Services Tax two decades ago, the changes require more frequent reporting of payroll information to the ATO.

“It’s massive. It’s the biggest thing we’ve seen affect business since the GST and it means all those businesses need to be using compliant software,” Mr Allert said.

Under the changes, all payroll data needs to be passed on to the ATO, including salary, wages, leave, PAYG and superannuation.

But about 24 per cent of small businesses in Australia are still manually entering this information into spreadsheets, or even using pen and paper, according to the study commissioned by Reckon.

“I had anecdotally heard this but it was amazing to do our own extensive research and get that confirmed,” Mr Allert said.

This is despite the fact that 58 per cent of small business owners admitted to having made costly administrative errors, such as overpaying suppliers.

“That is huge. We were staggered,” Mr Allert said.

“Certainly for those businesses who aren’t online or using current online compliance software, they have got way more of a chance of making mistakes.

“It’s archaic and there are so many more opportunities for errors.”

The research found that time-poor small business owners were trying to catch-up on admin and payroll while doing other things, such as watching streaming services like Netflix.

Others have been wary of adopting recent technological advances, which is why Reckon has developed a free mobile phone app, launched this week in the lead-up to the mandatory July reporting regime.

Shivani Gopal, small business mentor and founder of The Remarkable Woman, urged employers not to “bury their heads in the sand”.

“They are making their lives harder because they are going with what they know. They need to look up, ask questions and find an easier way. It’s the classic you’ve got to work smarter not harder.”

Having used the app to process the pay of her own employees, Ms Gopal said it was a simple, easy-to-understand process.

“I popped in their pay, popped in their names and processed their pay information and it’s about three clicks per person… I could do it at the movies,” she said.

Invoicing and chasing payments was the most time-consuming task for those polled by the researchers, making up 36 per cent of their administrative load, followed by compliance reporting (23 per cent) and managing cash flow (20 per cent).

Automating these tasks with accounting software resulted in small business owners reporting a 17 per cent drop in the amount of time they spent on administration. They also noted cost savings and the added convenience.

Mr Allert urged those small business owners who are yet to adopt the technology to visit Reckon’s In The Zone hub for advice and industry-specific regulatory information, or to try out the free mobile app.

“If you’re nervous of technology but have a mobile phone, which we all do today, then you can download the STP app and easily use it,” Mr Allert said.

“It’s a simple-to-use data entry app for processing your Single Touch Payroll obligations.

“Follow the prompts and key in the data and you’ll be guided through it.”

The information is then automatically passed on the ATO.

Ms Gopal said small business owners need to rid themselves of the distractions that prevent them from being at their most productive.

“They’ve given you a process to follow and you keep pressing the buttons until you’re done. For people who don’t feel comfortable using software or feel they aren’t across their accounting, it takes the fear out of the process and the unknown out of the process.”

She added: “The more you can take the thinking out of it, the more you can be on auto-pilot, and the more brain space you have for important work.”

Originally published as Shocking way one quarter of Aussie businesses still operate