Less than half of all small business owners see themselves as having ‘good’ or ‘expert’ financial literacy skills, and just over half of them don’t read their monthly accounts.

These are among the conclusions of a Small Firms Association survey carried out by iReach and conducted in collaboration with TU Dublin, Microfinance Ireland, SBCI and Skillnet Ireland. 

SFA director Sven Spollen-Behrens  (pictured) commented: “Our survey results highlight concern about the level of financial literacy amongst Ireland’s small business leaders. Unlike larger companies, which have access to experts, the success of small firms depends on the financial knowledge and skills of the owner.”

The findings in the report, which is available in full here, include the following:

• 81% of respondents said financial literacy was very or extremely important, but only 46% said they had good or expert knowledge
• Respondents thought that only 19% of other Irish business owners had good knowledge
• 51% of business owners do not read their monthly accounts each month
• 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 they use financial statements to make business decisions
• 42% said they do not understand financial statements
• 58% said they do not utilise financial statements as they believe that is the job of their accountant.

Professor Thomas Cooney of TUD commented: “Although it was commonly acknowledged that financial literacy is critically important, over half of the respondents stated that they do not utilise financial statements, as they believe that is the job of their accountant.

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“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.”

The SFA said it would continue to work towards raising financial literacy among small businesses. 

It also recommended measures it would like to see implemented to raise levels of financial literacy, including making it a government priority in Future Jobs Ireland, developing financial literacy modules to be integrated into the secondary school curriculum, a literacy programme aimed specifically at SMEs, and a digital platform and campaign to help raise standards.

Other findings from the survey, which was answered by 132 micro, small and medium-sized businesses, also supported the view that action is needed, including:

• The level of expertise was greater as the size of the business increased
• 80% of respondents said that the primary use of monthly financial statements was to inform their banks
• Respondents believed that 0% of Irish business managers generally had expert financial literacy, while 11% rated themselves as having expert knowledge (these either majored in finance or were qualified accountants)
• 35% of respondents with low to moderate expertise had received no financial training
• Over half of respondents do not calculate basic financial measurements regularly, including gross margin per product.

The report concludes with a handy financial literacy test for more business owners to check their expertise, or lack of it.