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SMEs

By Mark Gold, chairman of ACCA’s Global Forum for SMEs

I gave a keynote speech at the SME/SMP forum held by ACCA Uganda, in Kampala, recently.

As the chair of ACCA’s global forum for SMEs, I know that small businesses are critical about global growth because they feel there are many obstacles in their paths, such as lack of finances; absence of trusted advice in overseas markets; and scepticism of the unknown.

My speech was about these key issues and how this business sector is much more likely to use an accountant, because the advice they get from their accountants is the most trustworthy of sources.

ACCA has launched two campaigns in the past year to try and allay some of these concerns – public value and the complete finance professional. Both aim to show the wider public, including businesses, just how dependable the accountancy profession, specifically ACCA qualified accountants, is.

Due to the continuing global economic crisis, it has been hard for small businesses to find the funds to aid global growth during its time of need.

Banks are also being cautious with their money and so are not lending as much to SMEs, which fuels financial hardship for small businesses.

Accountants need to be on hand to advise those who seek it, before any “crisis” arises, not just when a problem has occurred. Problems need to be stopped in their paths before they develop into bigger problems.

Charles Ocici, executive director of Enterprise Uganda, came up with solutions for accountants and SMEs alike:

  • Cultivate the culture of taking professional advice FIRST, not only when there is a problem, or when they need a loan!
  • Offer solutions in a phased manner – if you gave a baby ten injections all in the same spot on the same day you kill it!
  • Use a language easily understood by your client
  • Take time to get into the guarded space of the entrepreneur to secure their trust.
  • Keep professional distance to be respected
  • Systems run the business – but people run the systems, so check how professional are your OWN internal and external team.
  • Price is not the main reason customers leave
  • An increase of 2% of sales equals a drop of 10% in costs.

We also had a panel discussion about why small business will not use small and medium practices (SMPs)

  • Taxes – they don’t want to register and risk having to back and regulate and pay for previous years.
  • Costs
  • Non-disclosure – cutting corners and don’t want transparency
  • So many fake accountants

There is concern over finding legitimate accountants, but the best way to check their credentials is to search for them on the internet and ensure they are ACCA approved, or contact the ACCA national office in the country you live in and they’ll be able to help you.

SMEs must include in their investment strategies good financial advice. It is key to investments and without it, decisions will not be made properly without the necessary guidance.

There should also be government support for SMEs to help them become competitive.

There is a need to educate small businesses that accountants are needed throughout their business lives, not just to get things going or to resolve any issues that may occur along the way.

SMEs are at the heart of our global economy, they have helped greatly in restarting the economy where national, and even global organisations, couldn’t.

Accountants and small businesses need to work together to keep things going. They are vital assets to the economy.

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By John Davies, head of technical, ACCA

Trust is one of the fundamental elements of the landscape in which the professions operate and is seen as one of the key qualities that professionals can bring to the business world.

Clients go to accountants, lawyers and doctors because they want expert, specialist advice that addresses the particular problem they have; they are prepared to pay for that advice because they trust the adviser to give them good advice which best suits their needs. Businesses employ professionals for similar reasons.

Governments for their part realise that the economic and social needs of society benefit from the services provided by professional advisers and have long been prepared to allow the activities of those advisers to be regulated in accordance with professional norms.

Today, we are facing a crisis in this fundamental element of trust. Simply put, politicians and the general public are questioning whether business and the professions can be depended on to run their affairs in the interests of consumers and society in general.

Auditors have been criticised from many quarters for being too close to their clients and for failing, as a result, to act competently and objectively. It has been argued that the rules on fair value accounting, which deal with the way that investments are measured and reported, are framed in a way which gives a misleading picture of the health of the reporting company. Insolvency practitioners are often accused of being complicit in the winding up of businesses that could be saved. And the prevailing economic climate has seen a material increase in the incidence of in-house fraud, and an accompanying concern about how accurately frauds and other forms of financial crime have been reflected in companies’ accounts, with, by consequence, questions about just how ‘true and fair’ some financial statements actually are.

The current concerns actually spread much wider than the professions themselves. The series of collapses in the banking sector in 2008-9 has led to exhaustive re-examinations of how the major banks are run: the UK’s Commission on Banking Standards has concluded, this month, that one issue (among many) that needs in future to be addressed is the process by which individuals are appointed to senior positions in the industry: there needs to be much greater emphasis on ensuring that the individuals in those positions are not only technically competent but can be relied upon to act in a prudent and responsible fashion. The public sector has seen a series of governance-related scandals that have revealed not only gross failures of operational effectiveness but a worrying determination on the part of management to cover them up and to prevent public-spirited individuals from divulging information about them.

This key issue of trust was the centrepiece of the 2013 meeting of the chairs of ACCA’s global forums, the group of expert bodies that advise ACCA on its technical and research work. The meeting considered just how widespread the problem was, how justified the criticisms were, and how the professions might respond so as to re-establish a relationship of trust with clients, employers, governments and wider society.

To help in the discussion of this topic, the meeting heard a presentation from Lawrence Evans, the president of the consultancy firm Edelman-Berland, which produces the Global Trust Barometer, the leading global study of trust and reputation.

Mr Evans drew out a number of key findings from his firm’s latest survey. They confirmed not only that the problem of trust was widespread but that, for all the scandals and the criticisms made of the business world by politicians, people still actually trust business more than they do politicians.

He stressed that the way forward for business was for it to make a strong commitment to transparency. There was a strong correlation, he claimed, between trust and transparency, and the more open and forthcoming businesses were, the greater the likelihood that stakeholder trust would follow. He also reported a strong link between trust in an entity and consumer attitudes towards it – the stronger the degree of trust, the more positive consumer behaviour was likely to be, and vice-versa. Another relevant finding from his survey, one that is encouraging in the context of the issue of trust in the professions, was that people generally placed more trust in the word of subject experts within a business than they do in CEOs.

Mr Evans’ findings suggest that, for all the important problems that the accountancy profession is currently having to wrestle with, accountants are still, potentially, a strong force for good. His contention that transparency offers the way to stakeholder trust is a message that needs to be heeded by businesses of all kinds, in both the private and public sectors, and one which reaffirms the strategic importance of accountancy. Transparency is, after all, what accountancy should be all about – the presentation of information which reveals an accurate picture of the business health of an entity – and a combination of technical competence and a commitment to openness, both qualities that ACCA actively encourages in its members, appears to be the formula which can lead directly to enhanced business effectiveness.

 

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By Mark Gold, chair of the Global Forum for SMEs, ACCA

Despite representing more than 90 per cent of global businesses, and accounting on average for 50 per cent of gross domestic product and 63 per cent of employment, SMEs have by and large been marginalised in the debate about sustainable business – both in terms of policy and practice. ACCA Global Forum for SMEs  has published a new policy paper  that looks at why this is the case and how we can change that. We know that SMEs have been slow to adopt environment-related improvements with only 29 per cent of SMEs in the EU thought have introduced measures to save energy or raw materials, compared with 46 per cent of large enterprises (see here).

The picture is likely to vary across Europe but as an average, the potential for improvements are certainly there, as well as the resulting benefits. So why are SMEs still thought to be slow in terms of recognising the importance and benefits of sustainable business practice?

One aspect is certainly that all too often we end up talking about SMEs as one homogeneous group, which is usually unhelpful. If you consider that this includes businesses with zero employees (only the owner manager) and those that have up to 250 employees, it becomes clear how vastly different these entities are. Their levels of formability, internal capacity and specialisms, not to mention motivations can mean that they end up in fact having very little in common when it comes to sustainability. But all too often we have sought to engage them without appropriately recognising how diverse and disparate this segment or the business population is.

The second question is: are we able to capture all the activities that SMEs do in this area appropriately? Are we asking the right questions? If we ask a business owner what their CSR strategy or sustainability practice is they may draw a blank face. They won’t think to tell us about the local charity they are supporting, about providing young people with work experience nor will they think about the cost savings they are seeking to make in their energy consumption as relevant answers. So are we capturing all the ‘business as usual’ activities that they are already doing?

Finally, are we giving them the right tools to communicate these and to engage? We talk about sustainability reporting, assurance, environmental management systems not to mention all the ‘jargon’ that has developed over time in the sustainability field. It is no secret that much of this has been developed with large businesses in mind so it is therefore no wonder that we are not seeing many enough SMEs engaging.

What I know from my own practice that specialises in creative industries and deals with thousands of SMEs each year is that these are responsible businesses, with a positive impact on society and a careful approach to environment. We ought to be able to capture this better.

“The talent agenda is vital” says Richard Moat FCCA, Chief Financial Officer at Eircom Group and Chair of ACCA’s Accountants for Business Global Forum, in this latest video about the changing role of the CFO.

He adds: “To be an effective business partner, finance people have got to understand the commercial realities of the business – have to have a strong commercial link as well as experience in finance.”

Richard also talks about how managing cost, rather than growth, is a big priority for CFOs today.

The Changing Role of the CFO report explains how the financial and business landscape is changing: greater uncertainty for the global economy, fluctuating energy costs, rises in commodity prices, currency fluctuations, government deficits and cost cutting.

The accountant in 2022

accapr —  6 December 2012 — Leave a comment

Drivers of changeBy Ng Boon Yew, chair of Accountancy Futures Academy, ACCA

As the Accountancy Futures Academy chair, I am often asked ‘So what does the future look like?’ As a practitioner myself, I think that the accountant that we know today will be different in ten years’ time – but how different?

For starters, the accountancy profession does not operate in isolation and its main challenges will certainly mirror those faced by the global economy. The areas that will impact the profession the most are: trust and reporting (strengthening public image by providing a more transparent, simplified but holistic picture of a firm’s health and prospects), regulatory expectations, standards and practices (a global approach), intelligent systems and big data (exploiting the repositories of big data), and finally, organisational remit (the increasing expectations that CFOs and the finance function should play a far greater role).

So how can a global accounting professional be better prepared to adapt and respond in a decade of uncertainty and rapid change?

As businesses adapt to a turbulent environment, accountants need to take on a far greater organisational remit, from strategy formulation through to defining new business models, the accounting professionals will need to embrace an enlarged strategic and commercial role. At the same time, accountants will need to focus on a holistic view of complexity, risk and performance and establish trust and ethical leadership. There is growing consensus on the need for reporting to provide a firm-wide view of organisational health, performance and prospects and must acknowledge the complexity of modern business and encompass financial and non-financial indicators of a firm’s status and potential.

Accountant’s global orientation, the ability to master the technical, language and cultural challenges of cross-border operations will be in the spotlight as the pace of global expansion of firms from developed and developing markets increases.

Lastly, the profession needs to reinvent the talent pool. The diverse range of demands on the profession is forcing a rethink of everything from recruitment through to training and development. Entrepreneurial spirit, curiosity, creativity and strategic thinking skills could be the key competences in the selection of tomorrow’s accountants.

There are significant uncertainties about how the driving forces will play out but the accountancy profession will need to be nimble enough to adjust and evolve and be able to maintain the balance between entrepreneurism and pursuing the highest standards of financial stewardship.

How certain is this? From my point of view, pretty spot on but only time will tell!