Dext’s research highlights the impact of poor expense tracking on the economy. Credit: Rawpixel.com/Shutterstock.

Small and medium-sized businesses (SMBs) in the UK are facing shortfall of up to £1.1bn per month due to poor expense tracking, revealed a study by bookkeeping automation platform provider Dext.

Dext’s research highlights the impact of poor expense tracking on the economy and outlines the urgency for modernising expense management practices among SMBs.

The survey, which involved more than 500 UK SMB leaders and 100 accountants and bookkeepers, found that SMBs are losing £742 monthly on average due to incorrect invoicing resulting from inadequate tracking of rechargeable expenses.

This shortfall is largely driven by outdated expense management systems that fail to provide real-time, accurate financial information.

Late payments from clients, exacerbated by poor expense tracking, are costing SMBs an estimated £1.9bn each month.

This affects the businesses’ cash flow and has a ripple effect on their suppliers, who are dealing with delayed payments worth up to £1.4bn, further unveiled the survey.

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Suppliers are particularly affected, and the overall inefficiency has long-term implications on growth initiatives, with 68.6% of SMBs reporting an impact on their development and relationships with employees (32%), suppliers (29%), and clients (23%).

Looking ahead in 2025, 53% of SMB owners are prioritising stronger financial control as a resolution.

The research also points out that accountants are spending five hours monthly correcting client reporting errors.

These findings are in line with the UK government’s recent efforts to tackle late payment issues for SMBs through initiatives like the Fair Payment Code.

The research was conducted by market researcher Censuswide between 22 and 27 November 2024, adhering to the Market Research Society’s code of conduct and ESOMAR principles.

Dext CEO abby Gillsaid: “With SMBs forming over 99.9% of total businesses in the UK, it’s clear that expense mismanagement is a challenge for the entire economy. As the data reveals, we’re in a vicious and costly cycle of delayed invoices, late payments, and strained relationships, which is impacting stakeholders across the board.

“For accountants, this represents both a challenge and an opportunity to guide small businesses in modernising their systems, ensuring accurate reporting and avoiding cash flow pitfalls.

“By leveraging digital solutions, SMBs can not only streamline financial processes, but also position themselves as reliable partners in the wider economic landscape, supporting growth and stability in 2025.”

In December 2024, IRIS Software Group agreed to acquire Dext Software.

The deal will unify Dext’s Bookkeeping Automation Platform with IRIS Elements, creating a comprehensive solution for the accountancy sector.