Australia’s small and medium-sized enterprises (SMEs) are collectively investing $2.2bn each year on digital solutions to help improve business operations, however, three in five are finding some of these tools are in fact hindering them, according to new research from business management platform MYOB.

In a survey of 1,500 Australian SMEs, 59% say they are currently experiencing ‘bad digitisation’ – where their business and people management software apps and tools run in silos, rather than seamlessly integrating with each other. This was true of 62% of the 137 construction businesses surveyed.

While SMEs are increasingly embracing digital tools for jobs such as managing people, tax, project management and cash flow, the new research unveils that a lack of integration between applications businesses have invested in is costing them time, money and resources, and posing a strategic risk.

“To put it in perspective, Australian households spend around $660 each year on streaming subscriptions like Netflix and Kayo, while our data shows the average SME spends 25% more than this on software subscriptions,” MYOB chief sales and support officer Daniel West says.

“The main difference is the streaming services we use as consumers do what we expect of them, they connect seamlessly with our smart devices. The digital systems that businesses use however, are not integrating together properly and it’s costing businesses dearly. With rising inflation rates, minimum wage increase pressures and ABS data showing over a third of businesses expect to increase their prices over the coming months, businesses need to be smart with their spending. They cannot afford to waste money on services that are not truly helping them.”

Financial impact of digital disconnection

More than a quarter (27%) of the SMEs surveyed have experienced costs blowing out because of disconnected digital tools, and across Australian businesses approximately $1.4bn is being wasted each year on unused digital tools.

Almost half of businesses (42%) admit they have given up using some digital business solutions due to their inefficiencies, but are still paying for them. When asked why they still pay despite no longer using these tools, the top reasons included that it was too much hassle to change, or because there is a lack of better alternatives to switch to.

“It’s subscription overload for businesses,” Daniel adds.

“Many consumers are cancelling subscriptions amidst rising cost of living pressures, and it’s an optimum time for businesses to also assess their subscription overheads, especially if some are sitting there unused. Choosing tools that offer multiple services in the one place or ensuring they only pay for the features they really need, could help businesses alleviate the financial and productivity costs they’re facing.”

One in ten businesses polled (12%) believe getting rid of software applications they seldom use could save them between $100 and $200 each month, and a similar proportion (9%) estimate it could be a $200 to $400 monthly saving.

Productivity cost

The research revealed Australian construction businesses are currently wasting the equivalent of one working day each week (seven hours) on average carrying out tasks caused by a lack of integration between their digital tools. This was aligned with the Australian SME average.

Nine in ten (91%) businesses are wasting valuable time on manual tasks or having to duplicate jobs. For construction businesses, this includes manually entering information from one system to another (34%), checking for consistency across the platforms (38%), and editing or fixing errors after information is transferred between systems (22%).

Growing strategic risk

Disconnection issues also pose a strategic risk. The MYOB survey revealed that seven in ten Australian SMEs say they find it difficult to get a full picture of business performance based on the intel from across their various systems or find themselves making operational decisions without full visibility of their business. A third (34%) also say it is making it difficult to add capabilities to their team and services or adapt the business as they need to – a challenge ultimately stifling growth and risking opportunities for success.

Addressing the disconnection challenge

“As an industry, software companies like ours need to take this ‘bad digitisation’ burden off businesses and work on creating better connected systems. Nothing should hold back ambitious businesses, and we recognise we need to do something about it,” Daniel says.

Speaking to how crucial it is for software companies to work together to create strong integrations, Flare HR co-founder and managing director, James Windon, says: “Flare is currently embedded in over 30 workplace platforms, so ensuring our software works together seamlessly with our partners is absolutely vital to provide the best experience for our customers and their employees.

“Our deep, direct integration with MYOB’s payroll and workforce management services lets businesses onboard an employee via Flare, without the need to log into another app, and is included in the subscription cost for MYOB users. This saves time for both the new starter and employer, ensures the business remains compliant, and provides a smooth and secure experience for the employee.”

Daniel concludes by saying that at MYOB, they know there are six core business processes around managing jobs, employees, suppliers, cashflow, finances and generating revenue, that when digitised can make a phenomenal difference to a SME’s chance of survival and success.

“But what’s become evident from our research is that local SMEs are really struggling to find systems that truly integrate with each other, or the one solution that offers all the capabilities they need all in the one place,” he says.

“That is why we are particularly passionate about building a cohesive business management platform and investing in the strategic partnerships and acquisitions that will help us deliver this for SMEs. Their productivity and growth depends on it.”