One in three small businesses fail to maximise IT investment

One in three small businesses in Australia are not getting the full value from their information technology (IT) systems due to under use (35 per cent) or lack of computer skills (24 per cent). And only 10 per cent of CPA Australia public practitioners believe that their small business clients are getting the maximum benefit from their IT investments.

These findings are from CPA Australia’s latest small business survey Information Technology – Its Impact on Small Business conducted on 600 small business (independent and employing fewer than 20 staff) and 105 CPAs in public practice across Australia in November 2006.

CPA Australia’s Business Policy Adviser Judy Hartcher said, ‘There has been a lot of energy expended by governments and business over the last decade on assisting small business to embrace e-commerce and go online. While this is an excellent strategy for many small businesses, the majority are using IT as a tool for reducing costs, not as a gateway to new business.’

According to the survey results, the majority of small business used IT to increase their efficiency (92 per cent), achieve business goals (82 per cent) and reduce costs (73 per cent). Two thirds of respondents said that IT helped their business to increase revenue (64 per cent), add value to existing products or services (64 per cent) or extend their geographic reach (62 per cent). Fewer business (51 per cent) said IT helped them open up new markets.

CPAs interviewed supported these findings, with 78 per cent saying that the main reason their small business clients invest in IT was to increase efficiency and 31 per cent answered to ‘cut costs’.

Ms Hartcher said, ‘Small business is forced to increase their efficiency in order to maintain a competitive edge in a global economy. Investing IT systems in order to computerise business functions such as inventory and payroll processing is one tactic small business has employed to remain competitive.’

Ninety-one per cent of small businesses surveyed said they have now computerised their bookkeeping. Eighty-three per cent are managing their debtors and creditors on computer and almost half have computerised stock and customer relationship management.

Small business is also likely to under invest rather than over invest in their IT systems, with the average investment in IT as a proportion of business capital to be around 12 per cent. When asked if they would increase their investment, three quarters of owners surveyed said they would if it leads to increased efficiency and cost cutting.

Other findings from the survey include:

  • * Nine in 10 small business don’t measure the benefits of IT or have a required return on investment.
  • * Seventy per cent of small business said their firm is very or quite dependant on IT. In spite of these high levels of dependence, only 13 per cent felt the failure of their IT systems would prevent them from operating at all.
  • * Most small business could recover from a major IT failure, with only seven per cent saying that they would find it very difficult or very expensive to recover.
  • * Fifty-five per cent of CPAs said that none of their clients had an IT risk management strategy and a further 27 per cent said only a few had such a strategy.

IT systems in the survey referred to both hardware and software.

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