Four Reasons Preventing Small Businesses From Digitalizing Accounting

Digitalization is too expensive for small businesses

Most of the solutions available on the market are aimed at large companies with large budgets. There are only 1% of such companies on the Czech market. "Accounting is a stumbling block because there is only a very limited number of accounting software on the market for companies of our size," explains Petr Čerňanský, winemaker and founder of Rybízák, Ltd.

In addition, digitalization is often tailored to the needs of the company. Depending on how complex accounting a company has, the cost of such a solution can range from thousands to millions. For this reason, companies offering tailor-made digitalization focus only on large players, so small and medium-sized companies have no choice but to do things in an old and expensive way.

Another neglected entity is accounting firms, to which small and medium-sized companies often outsource accounting. "In recent years, the Czech Republic has been experiencing a boom in the creation of accounting firms. However, the existing solutions do not take this situation into account on the market and are made on an outdated model – i.e. accountants sitting directly in companies,” says Kateřina Růžičková, owner of the accounting firm Visionservices, Ltd. and adds that developers of accounting programs have not yet responded to suggestions from accounting firms. Karin Fuentes noticed this gap in the market and filling this gap became one of the pillars for creating Digitoo.

Digitization is a lengthy process for small businesses

The implementation of a tailor-made solution can take months or years. For dynamic small businesses, such a time horizon is too lengthy and their needs may change during that time due to the rapid development of the company. At Digitoo, we are working to ensure that our solution is implemented in minutes and this problem is solved.

Until now, small companies had no choice but to look for alternatives and gradually approach the digitalization of accounting. "We think ahead and in each new thing that has a direct impact on accounting, we ask how it can be automated, how our ERP system will handle it, and what the impact will be on employees on finances, how time or complexity will be," says Denisa Šulajová, Finance & Accounting Manager at FreshLabels.

Digitization is not available for small businesses

In an ideal world, there would be an affordable, universal solution. "Small companies want to fit into a monthly fee of 34 GBP. If the price exceeds 170 GBP, it is no longer affordable for them,” Karin Fuentes disclosed Digitoo's research.

Even a few daredevils in our country and the world have started to invent such software. However, during the development, they realized that it was unnecessarily complicated and had to make Sophie's choice. "They will either make a system for large companies and make money, but they will not come to market with anything new that would solve the existing problems. Or they take a risk and focus on smaller companies with a more versatile solution, where the return on investment will not be so great,” explains David Homola, marketing and PR manager at Digitoo. 

The choice is not an easy one – to earn or to solve a problem. We know from the current situation how most of the development companies decided, and we also faced this dilemma. In the end, we chose to help small and medium-sized companies and set the pricing policy so that it is acceptable to everyone. The entry price is low and the final one depends on how complex the accounting solution each company needs. Flexibility is key to the rapid growth of small and medium-sized businesses. They can start with a minimalist solution and add more features over time as needed.

The complexity is also due to ossified legislation. "For the accounting revolution to become fundamental, laws would need to be amended, and then accounting systems can work the way companies need. At present, the legislation is one huge dinosaur,” adds Kateřina Růžičková.

Digitization is complicated for small businesses

At the same time, accounting systems do not go with the time and needs of companies, which so often have to look for up to 4 different solutions to cover their needs. "Some companies make software for reading data, others for implementation, others for connection to the system. Then the tools are exclusively for connection with banking, invoicing, and the like. If you want to cover everything, or even just invoicing, you have to buy tools from several sides,” says David Homola.

For some problems, no systems exist, and companies have no choice but to create the systems themselves. "We started looking in finance for options and ways to do things differently – towards society faster and easier for us. We still stick to that. We were even able to set up and simplify some activities in our ERP system ourselves. Of course, some of our ideas did not work in practice on the first try, so we had to devote our free time to it, but the sacrifice was worth it,” reveals Denisa Šulajová about FreshLabels' innovative approach.

"It would save all accounting companies a large number of costs and time if all invoices and cash registers automatically generated a QR code and all accounting systems had a reader with them," Růžičková dreams of seemingly simple progress. "The moment you buy it, you have a lot of clients who have a lot of documents, so now the easiest way is to hire a junior who will enter the physical invoices into the software. The accountant then checks all payments, matches them, and keeps them in the accounting journals,” she pauses over the costly and outdated system. "Employers have to pay the workforce, and sometimes several workers, to rewrite data from invoices into accounting systems 8 hours a day," adds Růžičková to her experience as both an accountant and a business owner. At the same time, she realizes that such a seemingly simple solution may not be easy to create.

Small businesses do not keep track of accounting costs

When it comes to accounting costs, companies often turn a blind eye and truly don't know how much accounting actually costs. Regarding the costs associated with the work of an accountant, including support from junior employees, we are talking about 1 GBP per invoice. Direct costs for materials, printing, and storage amount to around 50 cents (GBP) per invoice. Other costs that companies often overlook are administrative expenses related to sorting invoices, scanning them, preparing them for the accountant, managerial time when individual managers need to review and verify invoices. Companies also fail to realize the costs incurred due to document loss, additional communication with suppliers, etc., resulting in an overall cost of up to 20 GBP per invoice.

Calculate how much it costs to process one invoice with our ROI Calculator.

Even though digitalization is not a cheap and straightforward matter for small businesses, they spend very similar amounts on their current solutions. Companies that have realized this are much more open to new solutions, and that's precisely what we are working on at Digitoo. Would you like to try Digitoo without any obligation? Register for free on our website www.digitoo.ai and start using it immediately. We are continually improving Digitoo, and you can be part of the development of our product.