Many new businesses fail because their owners lack basic business knowledge such as the role of a balance sheet and how to improve cash flow.
Research conducted found one in 10 entrepreneurs surveyed couldn’t answer correctly any of 10 questions in a quiz on key accounting concept (Intuit Australia research).
Of 400 start-up owners surveyed nationwide, 12 per cent scored only one out of 10, and only 42 per cent scored five out of 10 or more.
Just 3 per cent of start-up owners answered all 10 questions correctly.
They survey revealed there is a critical knowledge gap when it comes to financial fitness for these start-up businesses. Furthermore, only two in 10 use an external accountant, and 22 per cent sill use a pen and paper rather than accounting software in managing accounts.
Data from the Australian Bureau of Statistics shows that more than 500,000 Australians are involved in start-up activity at any time. The information also shows one in four start-ups fail within their first year and only half make it through their third.
Business owners lacking basic financial knowledge could find it harder to know where they stand financially, harder to pick up problems, and harder to comply with regulatory requirements.
Some of the businesses that fail have fantastic products and services that don’t get traction because the business can’t be kept running.