When we go through the reasons that small business fail, it’s interesting to see what the data actually says. Going back and looking at some ASIC (the regulatory body for Australian companies) data from September 2012, it tells an interesting story about why start-ups and small businesses fail. And even though their data is aggregated over all businesses, the fact that small businesses make up approximately 80% of these failures makes for some interesting reading. The key reasons for business failure were outlined as follows:

  • Poor strategic management of the business (18.1%)
  • Inadequate cash flow or high cash usage (16.4%)
  • Trading losses (13.5%)
  • Poor financial control or lack of records (12.3)
  • Poor economic conditions (11.6%)
  • Under capitalisation (8.9%)
  • Poor management of accounts receivables (4.6%)

We can take the cheeky view of these figures and say that 100% of business fail because they run out of money. But the view from an official perspective is that 56% of business failures are directly related to the accounting and management of a business’s finances.

You would expect an accountant to talk about why the numbers are so important. And the reason they do is because accounting is the language of business.

That’s why Nudge gives start-ups and small businesses their numbers every month to help them grow. Getting on top of issues within a business is easier when you have the numbers in front of you. They never lie…