A survey by the Small Firms Association reveals that just half of small business owners believe they have good or expert knowledge of financial literacy.
This is a concern because unlike larger companies who have access to experts, the success of small firms depends on the financial knowledge of the owner.
The SFA's "Financial literacy amongst Irish micro, small and medium-sized businesses" report was conducted by iReach in collaboration with TU Dublin, Microfinance Ireland, SBCI and Skillnet Ireland.
The survey found that 81% of respondents said financial literacy was very or extremely important, but only 46% said they had good or expert knowledge of financial literacy.
51% of business owners also told the SFA that they do not read their monthly accounts on a monthly basis, while 25% respondents said they do not produce important financial reports like debtor/creditor lists and sales and expenditure reports.
Meanwhile, 42% of SFA members who took part in the survey said they did not understand financial statements.
58% also said they do not use financial statements as they believe that is the job of their accountant.
Professor Thomas M Cooney, from the College of Business at TU Dublin and lead author of the survey, said the report highlighted the fact that owner-managers do not recognise the value of using financial information to make better informed business decisions.
It also shows that they generally avoid engaging with financial accounts due to a lack of knowledge, the Professor added.
"With the financial world becoming increasingly complex, there is a compelling need for small business owners to improve their financial knowledge and skills," commented SFA Director Sven Spollen-Behrens.
"The SFA and its partners are committed to addressing this issue and will continue to work towards raising financial literacy amongst small business," he added.