Feature: Opportunity management and maximisation for SMEs

Research conducted by McKinsey & Co revealed that in 2020, small and medium enterprises (SMEs) employed up to 80% of the workforce in Africa while in South Africa, SMEs employed between 50% and 60% of the country’s workforce across all sectors. As our economies soldier through the aftermath of COVID-19, these numbers may change, but what cannot be doubted is the importance of SMEs.

During a session in which business owners in the mining sector were trained by Unafundo on how to cost and price their proposals effectively and accurately, I was pulled aside by one of the delegates during the coffee break and asked, with utmost sincerity, ‘Once I am done costing everything, how do I cost for the brown envelope?’ I instantly felt the flavour leaving my coffee. My alarm was not born out of naivety or ignorance to the fact that corruption exists at all levels, but rather that it is now ‘normal’ enough to almost be treated as a regular accounting line item.

To accountant professionals serving businesses and as business leaders themselves, at its core good governance and compliance are about opportunity management and maximisation rather than the mere avoidance of punitive or other adverse consequences. To bring good governance and compliance ‘to life’ for SMEs, as accounting professionals we ought to guide our clients through a process whereby good governance and compliance are both embedded in our daily functions.

At Unafundo we have worked with over 100 SMEs across various industries over the past three years and in our experience, governance and compliance are largely viewed as processes that need to be complied with to avoid negative consequences. As accounting professionals, we have a golden opportunity to change this narrative. Our relevance as accounting professionals depends to a large extent on what value we can add beyond the preparation and interpretation of financial data.

There are several examples of poor governance and non-compliance leading to businesses being unable to exploit opportunities or access relief measures. One such glaring example was the extent to which businesses were not able to take advantage of SARS COVID-19 relief measures due to their tax affairs not being up to date. In that same period, the plight of employees who lost their income and livelihood due to COVID-19-related business closures was brought to the fore as their claims for aid through the Temporary Employer Relief Scheme (TERS) were rejected largely due to non-compliance with Department of Labour (DoL) regulations. In other words, claims were rejected because some employees were not registered with the DoL or incorrect details had been filed with the said department.

While working with a number of SMEs throughout the various stages of lockdown, it became apparent to us that non-compliance and poor governance did not necessarily stem from greed and malice, but rather that a considerable proportion of business owners simply were not aware of the ‘what’, ‘when’ and ‘how’ of good governance and compliance. As accounting professionals, we have the privilege of imparting and, crucially, implementing precious knowledge about good governance and compliance.

KEY PRINCIPLES AND TOOLS

The following are a few key principles and tools that businesses should look to implement with the value-adding guidance of an accounting professional

• Good, consistent documentation − The existence or lack of a reliable paper trail can make or break even the best operations. My very first audit senior drummed the following into us: if it is not documented then it was not done. Good documentation need not be sophisticated but should rather merely capture the detail of a transaction in such a way that it will be reasonably understood by an independent third party. Documentation also helps businesses to avoid the emergency compilation of often error-prone statements and submissions in their haste to exploit an opportunity. An example of this is a business that hurriedly prepares annual financial statements without having kept proper substantiated records throughout the year.
• Financial literacy − Budgeting and financial planning are key tools that should help a business to be mindful of upcoming financial obligations such as taxes, memberships and relevant levies.
• Industry knowledge − Changes in industry-specific regulations could present opportunities, threats and additional obligations that a business may not be aware of.
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  Objectivity − A culture of questioning is a cornerstone to good governance and that, along with improved financial literacy, empowers business owners to engage and question us as accounting professionals. This is critical. It is a common occurrence among SMEs who have run up significant tax debts that they relied on an accountant who was not suitably competent, but they were none the wiser until the debts and tax non-compliance begin to threaten their going concern ability.
• Poor governance and non-compliance limit the ability of SMEs to attract investment.

KEY TAKEAWAYS

There are two key points to take away from this article. The first is that as we as accounting professionals strive to rebrand and emphasise the relevance of our profession, we have an opportunity to embed good governance in a meaningful, tangible way. The second is that we have an opportunity to be true chief value officers to SMEs and by so doing, guide them to manage and maximise the opportunities that will come their way as our economy recovers and ultimately thrives.

Author
Khulekile Msimanga CA(SA), Director and co-founder, Unafundo (Pty) Ltd