Small businesses are looking to make significant operational changes, especially around efficiency and finances, in the 2024/25 financial year.
New year's resolutions may be commonplace in January but for business owners it is the beginning of the tax year that marks a fresh start. A survey of UK small business owners and decision-makers by Intuit QuickBooks has found that the vast majority (99.6%) of businesses say they are planning to make operational changes in the coming tax year.
Four in ten (41%) of small firms polled describe their new plans as "radical". The survey results show that the top five changes that small businesses will make in the new tax year are:
- 52% will start using AI to improve efficiency;
- 50% plan to find ways to reduce tax liabilities in compliance with all laws and regulations;
- 48% say they will upgrade their financial management systems;
- 44% will pay closer attention to potential tax rebates;
- 41% plan to hire a new accountant or tax advisor (66% currently have a qualified accountant or tax advisor to help them manage their taxes).
While 81% of small businesses surveyed say the economy is negatively affecting their business, 68% agree that the new tax year is a good time to think about making changes in their business and 62% of firms surveyed are optimistic for the new tax year as it presents an opportunity to start afresh with financial management. Even so, 63% believe that the new tax year will be make or break for their small business.
Small businesses making cut-backs
The majority of small businesses (84%) plan to make cut-backs in the new tax year, with 44% choosing to reduce overheads and 37% expecting to make hiring freezes.
"Adapting to economic instability this year has been a challenge, but the new tax year presents a great opportunity for small business owners to start afresh, with solutions that might better meet their needs and do the accounting role for them, taking away the pain points and allowing them to remember why they started the business in the first place." Pauline Green, Intuit QuickBooks.
Many firms say that growth plans may have to be put on hold, with 34% of those polled saying that financial or economic uncertainty is preventing them from making effective plans. Furthermore, 79% could delay their investment plans until after the general election.
SME investment in growth hits three-year low
According to recent research conducted by Novuna Business Finance, the percentage of UK small businesses considering new projects to achieve business growth (66%) has actually fallen to its lowest level since January 2021. Of those that are forging ahead with new plans, the most common growth initiatives are:
- Improving cashflow (cited by 32%);
- Reducing fixed costs (56%);
- Dealing with late payment (25%);
- Investing in new equipment (20%).
The findings show that there has also been a quarter-on-quarter increase in the percentage of small business owners that plan to re-assess their financial commitments as a way to secure further growth, mirroring the findings of the Intuit QuickBooks research.
Jo Morris, head of insight at Novuna Business Finance, said: "One positive we do note from the data is that the focus on cost control in uncertain times remains a top priority - and as part of this operational prudence, more business leaders are now looking at their funding arrangements and financial commitments."
Written by Rachel Miller.
