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Accounting statistics for small businesses: A roundup
Posted by Tasnim Ahmed
February 1, 2023
Accounting plays a vital role in every business, regardless of how big or small. Handling accounts payable, accounts receivable, cash flow and taxes are just a few of the duties that fall under the accounting purview.
Although the hours spent on accounting can quickly accrue, especially time spent on taxes, these tasks often fall on the owner’s shoulders, particularly in the business’s early days. Once the business ramps up, small businesses often opt for outsourced accounting so team members can focus on their core competencies.
Listed below is a collection of accounting statistics that help illustrate how this important function is managed by small businesses nationwide, as well as the role of accounting firms and professionals.
64% of business owners manage their own books
According to Statista, almost two-thirds of business proprietors do their own bookkeeping. No doubt this has been helped along by cloud-based accounting software that eliminates much of the time-consuming work traditionally associated with bookkeeping.
29% of businesses with annual revenue under $250 million have automated their accounts payable process, per MineralTree
Meanwhile, more than 48% of larger businesses have switched to an automated accounts payable process, according to MineralTree.
45% of businesses favor paper checks
Checks continue to be a widespread and ingrained habit, with 45% of businesses using checks for the majority of their payments, according to MineralTree.
But 50% of businesses reported an increase in automated clearing house payments from 2020 to 2021, suggesting ACH payments are paving the way as the preferred substitute for paper checks.
Nearly one-third of small businesses spend over $5,000 yearly to manage federal taxes
While 31% of small businesses report spending in excess of $5,000 annually on federal tax compliance, just 15% reported spending over $10,000 per year, per Fit Small Business.
Sole proprietorship is the most-common business structure
According to the IRS, 27.8 million sole proprietorships and small businesses filed taxes in 2019. The most prevalent business structure? The sole proprietorship, which must file a Schedule C (Form 1040) to report income or loss.
Average gross income reported on Schedule C for 2019: $58,847
The IRS also reports that the average expenses reported were $46,179, for an average net income of $12,768.
Average wages paid by Schedule C businesses in 2019: $5,175
The only employees who receive wages from Schedule C businesses are those who aren’t owners. Given that most small firms become a corporation or limited liability company if they hire employees, the low wages paid by Schedule C enterprises is not surprising.
4.7 million S corporations filed tax returns in 2017
About 91% of S-corps have total assets of less than $1 million, per the IRS.
Average gross revenue recorded by S-corps in 2017: $1.7 million
S-corps also disclosed $1.5 million in annual expenses for an average net income of $101,572 in 2017. Of the $1.5 million in average expenses, just $62,000 was paid to shareholder officers’ salaries.
QuickBooks Online holds a 62% share of the small business accounting market
In the global small business accounting software market, QuickBooks Online holds a nearly two-thirds share, with most of its subscribers based in the U.S.
Over half of accountants cite regulatory changes as their No. 1 issue
Accounting professionals must keep up with rapidly changing industry developments that could impact clients. Over the past few years, they’ve faced challenges related to new revenue recognition rules, lease accounting standards and current expected credit loss accounting requirements.
This briskly changing landscape helps explain why 51% deem keeping up with regulatory changes as their top challenge — and why businesses are often best-served by having their taxes handled by an expert.
The number of small businesses in the U.S. was 32.5 million in 2022, comprising a whopping 99.9% of all businesses in the nation, as reported by the Chamber of Commerce. For the owners of these firms, accounting and finance can be a challenging part of running the business.
These statistics suggest that automation and software have helped employers in this regard, but that the need for professional expertise – particularly when it comes to taxes – remains a dominant concern.
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