Almost 80 per cent of companies believe that technology plays an essential part in their plans for growth, helping businesses to up their game and reach larger audiences, according to a new study commissioned by TalkTalk Business based on research by the Institute of Chartered Accountants in England and Wales (ICAEW).
The report’s author, Richard Cree, editor of ICAEW magazine economia said “There is no doubt that the application of technology is increasingly important to all businesses, regardless of sector and irrespective of their ambitions for growth. However, when it comes to how technology affects growth, respondents were clear that its key role was to deliver value by driving efficiencies and savings.”
The Geared for Growth report, which looks into the ambitions of UK businesses, also revealed that almost two thirds of respondents expected some business growth in the year ahead despite the economy, with one in 10 business owners setting this as their number one goal. Within this last group, classified by the report as ‘Thrivers’, healthcare, business and financial services and the media were most prevalent.
The majority (52 per cent) of UK businesses, classified in the report as ‘Strivers’, claimed to have modest growth ambitions. ‘Despondents’, which made up just five per cent of businesses surveyed, believed their business would downsize in the near future.
The Geared for Growth Report found that the top 10 per cent most ambitious companies were twice as likely to recognise the role technology has to play in bringing about growth, than those happy to stay a similar size. They were also least likely to think that luck played a part in their success.
Managing director of TalkTalk Business, Charles Bligh, commented: “Technology plays a pivotal role, with 80 per cent of respondents saying it was important or very important to help drive value through efficiencies and savings. British SMEs are clear that they need access to affordable technology to help control costs. The two thirds of SMES that are still ‘offline’ need to urgently consider the huge opportunities they could be missing, potentially valued at £18.8 billion per year.”
The report also explored key factors that impact on success such as people management and training. Almost a quarter (22 per cent) of businesses that took part said that they are affected by the skills gap and need better technical knowhow within their teams to succeed. A huge 49 per cent say that the skills held by the management team are critical to the business’ success or failure.
Commenting on the technology skills gap, Bligh added; “In a fast-moving digital economy, the companies most likely to succeed and grow are those with technically-skilled staff. Business can also help themselves to move from good to great by giving greater priority to IT training where needed and realising best value from their existing teams.
“My advice to SMEs would be to seek out providers that offer simple, easy to use solutions and the right level of support. Technology suppliers have a duty to lower the skills threshold wherever we can to make it easier for small businesses to take advantage of the power of technology.”
IT software budgets for 93 per cent of SMEs have increased or remained the same over the last five years. Despite this, more than three quarters of companies said that on average, 12 per cent of software purchases still go unused.
This is the first in a series of surveys from SolarWinds and demonstrates that while investing in IT software is seen as an important expenditure, there is work to be done to ensure that the software purchased is used effectively.
The majority of SMEs surveyed (63 per cent), have an IT manager who is principally responsible for addressing IT issues — though in over 30 per cent of organisations, the business owner or manager fulfils this role. Almost one third of respondents said that IT is not their main responsibility within their organisation, yet despite this, spend up to 30 per cent of their time managing IT issues.
Key findings include:
- 87 per cent of UK respondents said that up to half of purchased IT software is not utilised. Of this group, 28 per cent said that up to a fifth of software purchased goes unused.
- While budgets increased or remain the same in most industry sectors, companies in financial services and manufacturing were more likely to have reduced IT budgets the most in the last five years.
- Although IT spending is important to UK SMEs, budgets are small. One in five companies spends just £1,500 on IT software each year.
Security and uptime
- More than a quarter of those in the UK who said that IT budgets had decreased or remained the same, stated that this had a detrimental impact on IT security and uptime. This is in comparison to Germany where less than ten per cent felt that flat budgets had a negative impact on IT security and uptime.
- The majority of SMEs with fewer than 50 employees said that IT is managed by the business owner, in comparison to SMEs with greater than 50 employees where the majority had a dedicated IT manager to address IT issues.
- Of those surveyed in the UK, more than one in ten said that IT was not their main responsibility. Comparatively, almost half of those surveyed in Germany, have other responsibilities outside of IT within their organisation
- Furthermore, of those for whom IT is not their main responsibility, one third of UK respondents said that they spend an overwhelming 30 per cent of their time managing IT issues
“The fact that three quarters of respondents said that a percentage of their IT software is going unused is not surprising to me given that so many vendors are putting out expensive, difficult to install, and hard to use software,” said Sanjay Castelino, VP and market leader, SolarWinds. “Our mission at SolarWinds has always been to eliminate the complexity found in traditional enterprise software, making it easy to find, buy, deploy and maintain from the day it’s downloaded.”
This follows Ofcom’s Business Connectivity Market Review, which has examined the £2 billion-a-year market for wholesale leased lines. These are used by businesses, mobile operators and broadband providers to transfer data over their networks.
The proposals are subject to comments from the European Commission. They include new price controls on BT, the major provider of wholesale leased line services, which would significantly reduce the price of newer products based on modern Ethernet technology for many businesses. This will help meet the growing demand for fast data services from the likes of schools, universities, mobile operators, internet providers and consumers.
Ofcom is proposing that BT’s very high-bandwidth, wholesale leased line services at speeds above 1 Gbit/s – in all parts of the UK except London and Hull – should be subject to regulation, as BT has been found to have ‘significant market power’ in this relatively new market.
For Ethernet products with speeds up to and including 1 Gbit/s, Ofcom’s draft decision is broadly to maintain existing regulation, including charge controls and a requirement on BT to provide access on a strictly non-discriminatory basis. Ofcom is, however, proposing to impose significant price reductions outside London, at 11 per cent below inflation per year over the next three years.
Under the draft decisions, BT’s prices for leased lines based on older technology will be permitted to rise modestly to reflect higher costs in this declining market. Reductions in Ethernet charges will provide customers with a cheaper alternative and an incentive to migrate to newer, more efficient technologies.
From April, employers will be required to move to a new way of reporting PAYE. For the vast majority of employers, the first ‘real time’ return will be the first employee payday on or after 6 April 2013.
Reporting PAYE in real time will be quicker, easier and more accurate for employers.
SMEs’ payroll software will need to calculate PAYE and send the PAYE information to HMRC as part of a routine payroll operation. SMEs should also look carefully at payroll practices as – although the way PAYE is calculated is not changing – some of the practices that you use may not work for real time reporting.
Reporting PAYE does not change how or when people are paid, or when employers pay income tax and national insurance to HMRC. Instead of sending in the P14 and P35 forms at the end of year SMEs (or their agent, bookkeeper or payroll bureau) will:
- send a Full Payment Submission (FPS) each time, or before you pay employees
- send an Employer Payment Summary each month, which shows any adjustments to the amount you owe
- send an Earlier Year Update to correct errors or make adjustments to earlier years.
It’s also worth noting that the FPS is not available through HMRC Online – you will need to use RTI-enabled payroll software to generate your return.
The Forum’s latest quarterly Referendum study carried out amongst its members, showed that while the majority of firms now understood the implications of RTI, a worrying number were still in the dark.
RTI is a new payroll system being introduced by HMRC in April that will affect all business with paid employees.
The Forum’s latest research conflicts with similar studies by other professional bodies which have shown much higher number of businesses unprepared or even aware of RTI.
The Forum’s chief executive, Phil Orford, said: “Real Time Information is looming and while our research suggests there is a growing understanding of what this means for businesses, there are a significant number still ignorant and unaware.
“The other important issue raised by our research is the huge lack of confidence small firms have in HMRC to cope with the changes – 65 per cent of businesses expressing concern at this.
“If nothing else, this paints a depressing picture of small firms’ confidence in a government department that is key to their operations. Those businesses involved with the RTI pilot run by HMRC last year were a little more confident here, but there are clearly still fears about how seamless the transition will prove to be.”
But he added: “The positive news though has to be that compared to earlier studies carried out just a few months ago, more than two thirds of small businesses now know what’s expected of them. While it’s likely this is in part because of the work we’ve carried out with our own members to raise awareness of RTI, it still suggests the message is slowly getting through.”
The Forum research also saw many firms question the benefits of RTI. Just under half of respondents did not see any benefits, while 1 in 5 felt the scheme would make them less likely to take on employees.
Added Orford: “With this uncertainty in mind we are calling for HMRC to adopt a sensible and reasoned approach towards enforcement in the early stages. Already the government has announced the delay to some fining powers, but the effect of the switch to online reporting must not be underestimated, nor the cost of investing in new software ignored. Ideally we want to see a moratorium on fines in all but the most serious cases.”
The research was part of a wider investigation into the way small businesses use technology, and if or how they plan to use future technologies such as super-fast broadband to help them trade more profitably.
It showed that when it came to investing in technology most firms (35 per cent) were looking to spend on existing systems to get them working better. A significant 31 per cent were not looking to invest at all in the coming year.
There also appears to be apathy around cloud computing and mobile technologies. Business owners are split around the benefits of cloud computing, with 27 per cent supportive and 26 per cent suggesting the disadvantages outweighed the benefits.
The main disadvantages highlighted were data security (33 per cent), lack of understanding (31 per cent) and connectivity issues (23 per cent).
Almost half (44 per cent) of businesses felt 4G mobile technology would have only a slight effect on the way businesses operate, with just 4 per cent of the opinion it would be significant. 34 per cent felt it would make no difference.
One in four businesses mentioned that improved broadband speed was the key support needed by businesses.
However, e-invoicing appears to be catching on with SMEs. 47 per cent of businesses reported they would use e-invoicing when dealing with some or all of their customers by the end of the year, although 38 per cent had no plans to use it.
At 21 per cent, linking e-invoicing to current credit control procedures was the most frequently cited barrier alongside the need to link with other software. Figures were higher than suggested by other research, indicating growth in the market and the fact that our members have more formalised processes than most SMEs.
The impact of e-invoicing; whether it would improve or hamper prompt payment depended on anticipated usage, with those looking to send e-invoices to all customers tending to indicate that this would improve prompt payment, whilst those more likely to receive e-invoices (i.e. those who do not currently use them) least likely to see it as a benefit.
“The government’s Digital by Default agenda means that more and more government services will be provided primarily – or solely – online over the next few years. While there are of course immense opportunities here, from innovative use of new government data to create apps, to potential cost cutting for smaller businesses by automated invoicing services, it is clear there is also a huge culture change needed amongst a wide demographic of businesses.
“The message to business is clear: get on board or get left behind.
“When it comes to cloud computing, the needs of our members seems clear: speed and reliability over space. It is no secret that superfast broadband in the UK is coming online quite slowly in some regions. Whilst we welcome the £530m allocated in the current spending review to stimulate investment in rural communities even in London 1 in 5 Forum members still report connectivity issues.
“The 4G licences due to be granted shortly will improve that capacity by the summer but coverage remains an issue. If we are going to mandate businesses to carry out some services online and if we want to encourage greater tech start-ups then we have to get serious about providing that capacity.
“When it comes to e-invoicing, the benefits to a business of such a system are well known to effectively tackle late payment by customers. Take up appears reasonably positive among SMEs. 47 per cent reported that they would use e-invoicing by the end of the year.
“If the government can tackle the biggest barrier of interoperability with credit control procedures then this figure is likely to jump much higher.”