Over 570,000 small businesses will stage for auto enrolment over the next year, according to an estimation from the Pensions Regulator. This means that these SMEs will have to provide a workplace pension by 2018 with many having to do so by April 2017.

Additional costs and penalties could occur if the deadline is missed.

Fines for non-compliance can be costly, with the possibility of reaching £500 a day for some businesses.

Business owners are already stretched due to underestimating running costs so have to avoid extra unexpected costs such as fines.

Nearly two thirds (64%) of SME owners said that unexpected costs have caused issues including: profit losses (23%); being forced to readjust targets (21%) and having to lose staff (7%).

Geniac found that the average startup currently invests £22,756 in its first year to cover essential business administration costs yet those starting a business underestimate these costs, on average, by £2,525.

Mike Galvin, co-founder of Geniac, said: ‘The fact that over half of small businesses are unprepared for auto enrolment should ring alarm bells. Entrepreneurs must avoid sleepwalking up to the deadline as this could cost them dearly, particularly fledgling companies with limited budgets.

‘Thousands of business owners are simply in the dark over how to handle this major administrative change, or are putting off sorting it because of the time involved. To avoid unexpected penalties, business owners should seek professional advice to get ready by the deadline.’

Geniac’s full research report is here.