The study, conducted by Censuswide and Opinium, exposes a widespread lack of financial confidence among entrepreneurs leading to mistakes and missed opportunities, with significant implications for individual businesses and the broader economy.

Despite only a quarter (24%) of small business owners believing they lack necessary financial skills, the research indicates a deeper problem. Nearly two in five (38%) are unaware if their business was profitable last month, and over half (55%) struggle with cash flow management. 

This uncertainty often leads to active avoidance: more than one in four (28%) business owners don’t think of themselves as ‘a numbers person’ – a figure that rises to 32% among female respondents and 38% for 18-34 year old entrepreneurs. Alarmingly, more than half (55%) avoid finances, and one in five (22%) are too afraid to ask financial questions, fearing they should already know the answers.

Pub ‘misinformation’

Nearly half of accountants and bookkeepers surveyed (45%) blame ill-informed conversations in places like the pub for the spread of financial misinformation. They fear this means small businesses are making avoidable financial mistakes, with regulations relating to expenses being widely misunderstood.  

• Half (50%) of accountants and bookkeepers surveyed have worked with small businesses who incorrectly assume the government will reimburse their expenses
• A third (33%) of accountants and bookkeepers surveyed have met business owners who didn’t realise dividends were taxable
• One in 10 (9%) of the smallest businesses (up to 9 employees) incorrectly believe that they don’t need to declare all their income to tax authorities

For small businesses, accountants and bookkeepers are a hugely trusted source.  Nearly all small businesses (98%) who have consulted them found the advice helpful.  

The skills gap is creating unknown mistakes, at scale

This cultural resistance is fostering detrimental financial habits, including, in the last two years:

• Two in five (39%) small businesses failing to claim all eligible expenses, and over half (51%) are caught off guard by unexpected costs
• A quarter (26%) not setting aside enough money for tax or submitting a late tax or VAT return (26%)
• More than half of sole traders (59%) operate without a separate business bank account
• Half (51%) wrongly believe HMRC will contact them if a tax return is due
• A quarter (26%) of small businesses failed to set aside enough money to cover their tax bill at the end of the year

Kate Hayward, UK Managing Director at Xero commented: “We are a nation of small business owners, but we are not a nation who trains our children to think and behave like entrepreneurs. Culturally, there’s a stigma around not knowing our numbers, with many I speak to worried that they should know more than they do. There’s no shame in it when nobody is teaching us about it, but businesses deserve more. So today we’re launching our own free programme to help, but we are calling for further support from Government and industry. Plugging this skills gap will provide growth and economic stability, but let’s inspire entrepreneurs to dive in. Numbers are only scary if you ignore them; there’s no need to suffer in silence.”

For more startup news, check out the other articles on the website, and subscribe to the magazine for free. Listen to The Cereal Entrepreneur podcast for more interviews with entrepreneurs and big-hitters in the startup ecosystem.