At its recent meeting, the IFAC PAIB Committee sought to explore opportunities and challenges for accountants working in small and medium-sized entities (SMEs), particularly focusing on the chief financial officer/finance director role and the need for an effective finance and accounting team.
The session included presentations from three perspectives:
- Jonathan Shaw, Deltex Medical CFO, shared his experience as a senior finance professional in an SME.
- Mark Farrar, CEO of the Association of Accounting Technicians (AAT), gave an overview of how AAT supports its members working in SMEs, who represent over half of its membership.
- Iftikhar Taj of the Institute of Chartered Accountants in Pakistan spoke on the opportunities and challenges for accountants working in Pakistan’s five million family-owned micro, small and medium-sized entities.
Accountants working in SMEs often face a challenging environment. The CFO role in a small company can be a lonely place, particularly if the CFO is the only qualified accountant. With no sounding board and little access to technical expertise and resources, there can be a lot of pressure on the CFO. Their time can easily be consumed with short term cash flow concerns and other resource constraints, which leaves little time to focus on the business’ priorities.
But working as an accountant in an SME can also have advantages. Often out of necessity, these roles extend into the wider business operations and give the accountant greater exposure across the whole business. This connectivity enables the CFO to exert greater influence and involvement in business decision making.
The main takeaway from the session is that, because SMEs are so diverse, there isn’t a typical company with typical needs. Their priorities and needs will vary depending on whether the company is in start-up mode, growth mode, or more mature. However, particularly among those seeking to grow, the services and roles that accountants provide are perceived as valuable. That includes accountants working in the organization itself, as well as accountants as advisors, often small and medium-sized practitioners (SMPs).
The PAIB Committee considered what IFAC and its members are currently doing, and what more they could do, to support accountants working in SMEs.
What is the profession currently doing?
1. Influencing regulatory and public policy agenda
PAOs can play an influential role in raising awareness of SME issues through engagement with (and lobbying of) regulators, policy makers, and governments at a jurisdictional level. For example, to support small businesses with cash flow issues related to receipt of late payments, the AAT put forward recommendations to reform the UK’s prompt payment code, a voluntary code aimed at ensuring timely payments by large companies to their suppliers.
Although SME issues may vary between jurisdictions, there are a number of common challenges faced internationally. Engagement at the global level is needed, for example, with multilateral global institutions. In 2018, IFAC was privileged to be a member of the B20 Argentina SME Development Task Force. IFAC also provided input into a policy position paper, including specific practical recommendations to the G20 covering: talent attraction and entrepreneurial skills development; access to finance; simplified and SME-friendly regulatory framework; and SMEs’ participating in the digital economy. IFAC also included a recommendation on creating an environment for SME growth and inclusiveness, in its Call to Action ahead of the 2019 G20 Summit.
For more on SME policy see the article: The Foundation for Economies Worldwide Is Small Business
2. Technical and ethical advice and support
Many PAOs offer their members various mechanisms for technical and ethical advice and support, which is particularly useful for accountants without access to in-house technical expertise. Activities include:
- Telephone helpdesks to provide advice on technical accounting matters.
- Confidential helplines offering advice for accountants dealing with ethical dilemmas. All accountants working in business can face ethical dilemmas in their work, but those working under pressure in SMEs may face particularly challenging issues, especially if they impact on the survival of the company. For more information on PAO ethical support see the article: Paying Professional Ethics More Than Lip Service
- Networking events, which provide opportunities for accountants working in SMEs to interact and share knowledge and experiences with peers. This is particularly important for those working in teams with few or no other accountants. Findings of research by the Edinburgh Group, a coalition of 16 accountancy bodies, also highlights the importance of networking between SMEs and SMPs.
PAOs can help facilitate local, regional, and global networking, which can be a valuable source of support for accountants on both SME-specific technical and ethical matters. Examples include the ACCA Global Forum for SMEs, ICAEW’s annual SME Conference, and at a regional level, Accountancy Europe hosts a number of SME events.
3. SME-specific continuing professional development (CPD) and training
Tailored training and development activities that address SME-specific issues, as well as related skills and competencies, are useful in providing more practical support that is applicable to accountants in their everyday work. Examples include:
- CPD provided online via ACCA, through webinars and technical articles. These include the webinar “Setting up your own business” and the SME technical article, “Accountants' role in advising SMEs on going digital”, which requires completion of a multiple-choice quiz to be awarded CPD units.
- SME funding masterclass run by the Northern Powerhouse Investment Fund and ICAEW.
- CPA Canada’s on demand webinar “What keeps you up at night? Tips for business success”, which provides practical advice for business owners.
- To support accountants working in family owned business, the Institute of Chartered Accountants of Pakistan (ICAP) is providing education and CPD activities on managing interpersonal relationships (including dealing with multiple generations), communication skills, understanding emotional intelligence, understanding business and business strategy, and technology-driven approaches.
- CIMA CPD course “Financial management in SMEs”, which provides training on how to create a framework for managing strategic objectives in privately owned businesses to control the business, manage risk, fund the business and maximize value on exit.
4. SME guidance and thought leadership
PAOs can support their members by undertaking SME research to identify market trends and needs, and by producing relevant guidance and other support tools that are SME specific. A selection of resources from IFAC, PAO and others are included in an appendix to this article.
What more can the profession do?
Additional actions PAOs can take to support accountants in SMEs include:
- Develop tools to support SME growth, for example roadmaps for development, evaluation tools to support understanding of future focus areas, and simple checklists covering the basics such as necessary controls.
- Advocate to promote the wider, more strategic role of accountants in SMEs, going beyond traditional accounting.
- Leverage technology to maximize virtual engagement and increase interaction between the SME community.
- Further support on ethics and dealing with ethical dilemmas (including the impact on wellbeing).
- Negotiating member discounts on new services, for example data analytics software.
- Repurposing existing guidance to be more applicable to accountants in SMEs as opposed to larger organizations. For example, by showcasing SME examples, as well as ensuring the language used resonates better with SMEs.
SME research and survey reports:
- ASEAN Federation of Accountants: The Institutional Environment for Small and Medium Enterprises (SMEs) and Roles for the Accounting Profession - discusses SMEs in the region from three different perspectives: the definition of ASEAN SMEs; the professional landscape and accounting for ASEAN SMEs; and the forward view, examining the role of accountants as trusted business professionals for ASEAN SMEs.
- CPA Australia: 2018 Asia-Pacific small business survey, found that overall, small business conditions were slightly weaker in 2018 than in 2017. These conditions are likely to continue into 2019, with small business confidence also being slightly weaker in 2019. Global trade tensions appear to be the primary reason for the weakening in confidence.
- CPA Australia & KPMG: Two sides of a coin: Differing perspectives in Singapore’s family businesses - KPMG in Singapore and CPA Australia conducted research on the successes and challenges of local family-run businesses, and also conducted detailed interviews with 20 local business leaders, both founders and successors, on issues that matter most to them.
- CPA Ireland: Charting a Course for Growth: What Irish SMEs can learn from their multinational neighbours - there is much to be gained through collaboration between SMEs and multinationals. This report focuses on areas of best practice that can be adopted or emulated by SMEs.
- European Federation of Accountants and Auditors for SMEs: Evidence on the value of audit for SMEs in Europe – provides perspectives of owner-managers, company accountants and directors on the value of their audits.
- ICAEW: The 99.0%: Small and medium-sized Businesses: Who are they and what they need? – summarizes the results of a survey of 500 UK incorporated businesses with 250 or fewer employees. A key finding in the report was that businesses, from sole traders up to medium-sized enterprises, overwhelmingly report an accountant as their most trusted business adviser.
- IFAC: The Role of SMPs in providing business support to SMEs, represents a comprehensive review of literature published post-2010 to help formulate an understanding of the SME-SMP relationship.
- IFAC: The Relationship between Accountancy Expertise and Business Performance - working with researchers at the Bucharest University of Economic Studies, IFAC conducted a literature review to assess the relationship between using accountancy expertise and business performance. The report includes a section on SME performance.
- OECD: SME and Entrepreneurship Outlook 2019, presents the latest trends in performance of small and medium-sized enterprises (SMEs) and provides a comprehensive overview of business conditions and policy frameworks for SMEs and entrepreneurs.
SME guidance and tools:
- ACCA: Ready for Growth? A checklist for CFOs of high potential businesses highlights the needs of SMEs experiencing fast growth. The 8 case studies demonstrate a clear symbiosis between business growth and the evolution of the finance function.
- ACCA: Scale-up success: What do SMEs need to supercharge their growth? highlights the drivers of improved SME productivity. There are multiple drivers across areas of business activity that SMEs can develop in order to increase their productivity including talent, management practices, access to funding, networks and external engagement, R&D and innovation and adoption of technologies. The top five barriers for SMEs are: Domestic market conditions; Recruitment and skills; Global trade environment; Access to funding; and Regulatory compliance.
- ACCA: How vision and strategy helps small businesses succeed: Governance needs of SMEs, identifies the key components that build a robust organization both internally and externally.
- Accountancy Europe: How to secure financing for SMEs – opportunities in EU funding, with specific knowledge of EU funding processes and a deep understanding of SMEs’ needs, accountants can help entrepreneurs to secure funding.
- CPA Canada: Transacting in crypto-assets for small and medium-sized enterprises (SMEs), guidance for SMEs thinking of using or accepting crypto-assets as a form of payment, to help them understand crypto-assets and design an effective control environment that can ensure the security of those assets.
- IFAC: Good Practice Checklist for Small Business - this checklist is meant primarily for SMPs, as a marketing or diagnostic tool to help them determine the advice a small business client may need, and also to help them in managing their own businesses.
- MIA: Why Audit Matters to SMEs - This booklet was created especially for owners and managers of Small and Medium Enterprises (SMEs) to illustrate the value of an external audit.
- Royal NBA: Cybersecurity health check - Middelgrote bedrijven - a tool developed for medium-sized companies to get started with cyber security.