Only 46% of small business owners perceive themselves to have good or expert knowledge of financial literacy
The Small Firms Association (SFA) today launched the ‘Financial literacy amongst Irish micro, small and medium-sized businesses’ report, in collaboration with TU Dublin, Microfinance Ireland, SBCI and Skillnet Ireland. The survey was conducted by iReach.
Commenting, Sven Spollen-Behrens, SFA Director, said: “Our survey results highlight concern about the level of financial literacy amongst Ireland’s small business leaders. Unlike larger companies who have access to experts, the success of small firms depends on the financial knowledge and skills of the owner.”
The main findings of the SFA survey include the following:
• 81% of respondents said financial literacy was very or extremely important, but only 46% said they had good or expert knowledge of financial literacy. Respondents thought that only 19% of other Irish business owners had good knowledge;
• 51% of business owners do not read their monthly accounts on a monthly basis;
• About a quarter of respondents do not produce important financial reports like debtor/creditor lists and sales and expenditure reports, while 16% of respondents do not use monthly reports;
• 34% said that they use financial statements to make business decisions and 42% said that they do not understand financial statements; and
• 58% said they do not utilise financial statements as they believe that is the job of their accountant.
“Although it was commonly acknowledged that financial literacy is critically important, yet over half of the respondents stated that they do not utilise financial statements, as they believe that is the job of their accountant,” noted Professor Thomas M. Cooney, College of Business, TU Dublin and lead author of the survey. He further stated that “this report highlights that owner-managers do not recognise the value of using financial information to make better informed business decisions and generally avoid engaging with financial accounts due to a lack of knowledge.”
SFA has recommended a problem-solving approach that would address the key issues identified by small business owners. The recommendations put forward in the report are:
• Ensure that the development of financial literacy amongst owner-managers in SMEs is a priority for government by including it in the forthcoming policy on SMEs and Entrepreneurship under Future Jobs Ireland;
• Develop financial literacy in our young people by exploring the primary and secondary school curricula to see where financial literacy could be included in a more meaningful way;
• Develop a blended learning financial literacy programme aimed specifically at SMEs to support a higher level of financial literacy expertise;
• Create a digital platform and campaign to increase financial literacy expertise among small business owners; and
• Raise awareness amongst education and training providers and professional bodies on the importance of integrating financial literacy within existing training and professional development courses targeting SMEs.
Sven Spollen-Behrens concluded: “With the financial world becoming increasingly complex, there is a compelling need for small business owners to improve their financial knowledge and skills. The SFA and its partners are committed to addressing this issue and will continue to work towards raising financial literacy amongst small business.”