SMEs need finance expertise to grow - ACCA

Small businesses with well-developed finance teams achieve faster, more sustainable growth and can attract investment to help them develop, the Association of Chartered Certified Accountants (ACCA) has said.

In a new report titled “Accountants for Small Business”, the Association said the SME finance function plays a critical role at different stages of an SME’s growth in attracting investment and helping them “emerge from the shadows”.

It said SMEs need to make themselves ready and be in shape to be able to receive finance -- and that the burden should not be solely on the lender or investor. ACCA Head of SME Policy Rosana Mirkovic said: “There is considerable evidence that shows growth is much stronger among SMEs with a comprehensive finance function backing them up. The role of the accountant in an SME setting goes well beyond the basics of bookkeeping. Their role is vital at different stages of an SME’s development.

“Credit providers, supply-chain partners and other stakeholders need a wealth of information from the finance team of an SME. For some investors, the information they require changes after investment to focus on other aspects of the business, such as agreed milestones. Finance professionals are central to providing that insight into the business at all stages.”

She added that “day to day financial management is the key to accessing finance. By the time the owner/manager decides to apply for any kind of funding, their chances of getting it are mostly locked in by the way they’ve run their business to date. Independent research confirms that a well-run finance function staffed with appropriately-trained people makes SMEs more creditworthy and investment-ready -- and is a cause, not a consequence, of growth. Despite that fact, most SMEs don’t take advice before applying for loans; most have no trained staff in charge of their finances; and most don’t produce regular management reports.

“While focus has largely been on who won’t lend to SMEs, small businesses have a part to play in making themselves finance-ready,” she said. According to the report, 17.4 percent of SMEs in the UK with regular management reporting, a formal written business plan, and financially trained staff grew more than 30 percent -- and 10 percent of those companies had a minimum-risk rating.

Just 7.5 percent of SMEs without that financial expertise and support grew 30 percent and only 2.5 percent had a minimum risk rating.

Ms. Mirkovic added: “Our research, and that of others highlighted in our report, points in the same direction -- the role of finance professionals is widening and taking on a more business-focused nature, which is of particular importance for SMEs. From their infancy to their eventual growth into something larger and beyond, the role of their finance function changes and adapts to suit the needs of the business.

“The accountants who help a new start-up get off the ground will play a very different but equally critical role when that business is in full, sustainable growth mode. It is for this reason that ACCA trains its members to be skilled in a broad range of abilities to make them complete finance professionals."

She said: “High-growth firms are most likely to reach their maximum growth rate just three years from registration, which means that at such an important period of change, having a finance professional on board that can support the business from start to high growth and beyond is clearly important.”

SMEs have emerged as a key sector for the global economy. They account for half of the world’s private sector output and nearly two-thirds (63 percent) of jobs worldwide, as well as approximately one-third of all developed-country exports. The SME sector is a major employer of finance professionals in its own right.

Although only about 13 percent of ACCA members’ careers start in SMEs, 45 percent of members, including 54 percent of Chief Finance Officers (CFOs), have at some point in their lives worked for an SME.