Controlling SMEs: Why four out of five insolvencies could be avoided

A shocking figure makes it clear how critical the situation in German SMEs really is: Four out of five insolvencies are caused by a lack of controlling SMEs^[1]. This means that 80 percent of all company bankruptcies could have been prevented with better financial management. Nevertheless, most small and medium-sized companies continue to work without professional controlling — often until it is too late.

In times of rising costs, uncertain supply chains and a shortage of skilled workers, transparent financial management is becoming a matter of survival. While large corporations have long been relying on sophisticated controlling systems, many SMEs are still navigating turbulent financial years blindly. That must change, and quickly.

In this article, you will learn why controlling is essential for your company's survival, what hurdles prevent many SMEs from doing so and how you can get started with simple steps. You'll see: Controlling doesn't have to be complicated or expensive — but it can make the difference.

Why controlling saves SMEs from collapse

Controlling creates transparency where gut feeling and experience reach their limits. It provides you with clear answers to the crucial questions: Where does your money go? Which products or customers are really profitable? How will your liquidity develop over the next few months? Without this transparency, you make important decisions based on incomplete information.

The consequences often only become apparent when it is already too late. Liquidity bottlenecks arise gradually, unprofitable business areas eat up resources for months and incorrect investments tie up capital that would be urgently needed elsewhere. Functioning controlling recognizes these developments at an early stage and enables timely corrections.

Excel-based planning, which many SMEs still rely on, is particularly critical. Studies show: 94 percent of all business Excel spreadsheets contain errors^[7]. This error rate is not only statistically impressive, but also an enormous risk for your company. Wrong figures lead to wrong decisions, and wrong decisions can threaten your existence.

“Four out of five insolvencies in German SMEs are caused by a lack of controlling.” — Euler Hermes/University of Mannheim

Another critical point is the liquidity situation. According to the KfW SME Panel, 11 percent of SMEs already rate their liquidity as critical^[2]. Micro-enterprises in particular are particularly at risk here. Without regular liquidity planning and cash flow forecasts, you will be surprised by payment bottlenecks, which usually build up over weeks or months.

The controlling blockage: Why so many SMEs are hesitating

Despite the obvious advantages, many SMEs shy away from professional controlling. The most common objections are: “Too complex, too expensive, too time-consuming.” This perception is understandable but often outdated. Modern controlling solutions are no longer the cumbersome systems of yesterday, but user-friendly tools that work even without financial expertise.

Traditional cooperation with tax advisors is a major problem. These understandably focus on compliance, accounting and legal requirements. Controlling, forecasting and strategic management are usually not the focus of consulting^[1]. Many entrepreneurs therefore believe that external accounting already provides sufficient protection and underestimate the added value of forward-looking financial management.

The digitization gap further exacerbates the problem. 82 percent of German SMEs still work with manual or only partially automated processes^[1]. Without digital and consolidated data, reliable controlling evaluations can hardly be prepared. As a result, decisions are based on outdated, incomplete or incorrect information.

“94% of all Excel sheets contain errors — an enormous risk for business decisions.” — Poon et al., 2024

Excel is often regarded as a panacea, but quickly turns out to be a bottleneck. The tables are prone to errors, difficult to understand and do not allow teamwork. When several people have to work on plans at the same time, things get messy. Version conflicts and inconsistent data sets are inevitable.

The personal burden for entrepreneurs is enormous. Without clear figures and reliable forecasts, there is a permanent state of stress. You never know exactly where your company really stands, which projects are worthwhile and which risks arise on the horizon. This uncertainty not only costs nerves, but also money and opportunities.

The practical introduction: How to get started with Controlling

The path to professional controlling doesn't have to be complicated. It is important to start in a structured way and not to overwhelm yourself. Here is a tried and tested step-by-step guide:

Step 1: Define clear goals and indicators

Start with the most important KPIs for your business. Liquidity comes first — without cash flow, every company dies. Add revenue development, gross margins and cost center evaluations. These four key figures already give you a solid overview of business development.

Step 2: Consolidate data sources

Your accounting is the most important data source for controlling. Make sure that all business transactions are recorded promptly and correctly. DATEV-compatible systems offer a major advantage here, as the data can be automatically transferred to controlling tools. Avoid media breaks and manual data transfers wherever possible.

Step 3: Choose simple tools

Don't jump straight into the ERP adventure. Modern cloud solutions offer a smooth start without a complicated setup. Pay attention to usability, automatic data connection and understandable evaluations. This saves time and drastically reduces the error rate.

Step 4: Extend gradually

Start with simple reports and target/actual comparisons. Then expand with scenarios and forecasts. This approach doesn't overwhelm you and enables continuous learning. Each step builds on the previous one and deepens your understanding of the numbers.

Important: Start small, but start. There is no such thing as perfect controlling from day one. It is crucial that you regularly make decisions based on reliable data and continuously improve your management tools.

How modern technology controlling is revolutionizing SMEs

Artificial intelligence is fundamentally changing controlling. While traditional tools only calculate numbers, AI-based systems can also understand and interpret them. They identify correlations, explain discrepancies and provide specific recommendations for action. What previously required financial experts and expensive advice is provided by intelligent software.

The advantage for SMEs is obvious: quick start, fewer errors and realistic forecasts. Cloud technology and DATEV integration eliminate the complicated setup. You can get started right away and receive meaningful evaluations within minutes. The learning curve is flat, but the benefits are immediately noticeable.

Modern controlling tools also offer benchmarking functions. You can not only see how your company is developing, but also how you stand compared to similar companies. This classification helps to evaluate your performance and identify potential for improvement.

Another advantage is the ability of modern solutions to work in a team. Several users can work at the same time, leave comments and work on plans together. Version conflicts are a thing of the past, data quality is increasing and transparency within the team is significantly improved.

The future of controlling is now here

What was once only reserved for corporations with expensive ERP systems is now available to every medium-sized company. AI-native controlling software makes complex analyses, benchmarks and forecasts accessible to SMEs in the DACH region. These tools not only understand numbers, but also what they mean for your business.

The game changer lies in ease of use. You don't have to be a financial expert to create professional reports. The software translates complex financial data into understandable recommendations for action and makes controlling a practical tool for everyday business life.

Clear controlling is essential for the future of your company. The markets are becoming more volatile, requirements are increasing and competition is intensifying. Companies that invest in professional financial management today create a decisive competitive advantage. You make better decisions, react faster to changes, and avoid costly mistakes.

The message is clear: Controlling is no longer an option, but a necessity. The good news: Getting started has never been easier than it is today. Modern tools, intuitive operation and affordable prices make professional controlling possible for every company.