Small Businesses Stronger Following Economic Storm but They Still Need Help, International Survey FindsBy Acca the Association Of Chartered Certified Accountants, PRNE
Tuesday, December 7, 2010
LONDON, December 8, 2010 - A worrying number of small businesses believe they do not have enough
cash reserves to survive another economic downturn, a study by Forbes
Insights in association with ACCA (the Association of Chartered Certified
Accountants), Certified General Accountants Association of Canada
(CGA-Canada) and CNDCEC, the professional body for certified accountants in
Italy, has found.
The study was based on a survey of more than 1,750 small and medium sized
enterprises (SMEs) in Canada, China, Italy, Singapore, South Africa, and the
UK, with 30% of the sample micro businesses employing fewer than 10 people.
It shows that while most SMEs believed the worst of the recession had
past, there was an unexpectedly high number of businesses - between 31% and
54% in each country, including those which have seen high growth and were
less affected by the global downturn, who felt they did not have adequate
cash reserves to survive another financial crisis.
SMEs surveyed said the recession has forced them to become better
businesses and if they take on risk it is only where they can have control.
Growing businesses, especially in the more dynamic economies, appear to be
facing stiffer competition and rising costs, putting profit margins under
According to respondents, lenders appear to be directing funds to larger
SMEs and big corporations rather than micro and small enterprises. The study
also found that credit is being directed away from working capital towards
capacity building investments and is increasingly likely to be secured
against personal or business assets, while equity investments are drawn to
acquisitions and to financing local or international expansion.
As commercial providers of finance have become reluctant to finance
working capital, assume customer credit risks or refinance debt, the weight
of expectation has shifted to shareholders and trade creditors.
The study found that those businesses that value professional or expert
advisers above others have performed better - professional advice has given
lean SMEs more confidence about their chances of survival, by ensuring that
they have fewer urgent financing needs and better access to credit.
The study has made a number of recommendations.
- SMEs must consider factors such as interest rate increases, exchange rate volatility and inflation when developing business plans and risk management policies. - Governments can help reduce uncertainty through early and reliable commitments on tax, spending, monetary policy and regulation. - Governments must consider strengthening loan guarantee schemes for SMEs to provide solutions where sufficient collateral cannot be provided. - More businesses should explore supply chain finance: whereby large customers provide credit to small suppliers by factoring their own invoices, and governments, commonly the most creditworthy customers of SMEs, should consider similar means of financing their suppliers. - Business advisers and government-funded enterprise support agencies must prioritise improving credit- and investment-readiness among SMEs by explaining the information needs of capital providers and championing other sources of finance, such as business angels, where appropriate. - Providers of capital must be clear about their lending or investment criteria and consider the need for security or personal guarantees flexibly, case-by-case. - Businesses should use financial and credit information on their customers and ensure their information is available to prospective trading partners. - Governments must acknowledge the critical importance of trade credit as a financial market, ensuring that credit information is widely available and that creditors have access to reasonable means of enforcing their claims. - Business advisers and government-funded enterprise development agencies should be looking for undercapitalised SMEs and actively encouraging action if necessary. - Providers of capital should acknowledge the value of professional advice in their communications with SMEs and consider directing unsuccessful applicants to professional advisors.
Helen Brand, Chief Executive of ACCA, says: "It has been a challenging
two years for small businesses around the world but they have emerged, on the
whole, somewhat wiser, more in control and cautiously optimistic. However the
recovery, such as it is, presents its own unique risks. As this research
demonstrates, having the tools, the support and the confidence to navigate
these risks can make all the difference between continued growth and
stagnation for small businesses."
"Although there are signs of economic recovery, the SME sector is not out
of the woods yet," says Anthony Ariganello, President and CEO of CGA-Canada.
"We believe it's vitally important to understand the issues faced by this
sector - and having taken an in-depth look at the current situation - it's
clear there are things to be done by policy-makers, by business advisors, by
financial institutions and by the businesses themselves."
Giancarlo Attolini, board member in charge of International Affairs at
CNDCEC, says: "Professionals can play a crucial role in the current financial
crisis, supporting SMEs in their decisions concerning financing decisions and
business planning. Good budgeting of financial resources and ability to
secure third-party capital proves to be key in surviving the crisis. The
survey shows that financing needs to change, based on enterprises' needs and
geographical location. Micro and small enterprises, which represent the main
clients of most practitioners, went through great difficulties in securing
finance during the credit crunch; professional skills and advice can
adequately support them in accessing finance and managing their cash flows."
The Consiglio Nazionale dei Dottori Commercialisti e degli Esperti
Contabii (CNDCEC) was established in 2008 following the merger of the two
previous Italian accountancy bodies, namely Consiglio Nazionale dei Dottori
Commercialisti and Consiglio Nazionale dei Ragionieri.
CNDCEC represents the accountancy profession in Italy. It is a public
entity regulated by law, under the supervision of the Ministry of Justice.
CNDCEC is one of the founding members of IFAC and FEE.
The main fields of activity of the Italian accountancy profession are:
accounting, taxation, auditing, corporate governance, management consulting
Founded in 1908, the Certified General Accountants Association of Canada
serves 75,000 Certified General Accountants and students in Canada and more
than 90 countries. Respected accounting and financial management
professionals, CGAs work in industry, finance, government and public
CGA-Canada establishes the designation's certification requirements and
professional standards, offers professional development, conducts research
and advocacy, and represents CGAs nationally and internationally.
ACCA (the Association of Chartered Certified Accountants) is the global
body for professional accountants. We aim to offer business-relevant,
first-choice qualifications to people of application, ability and ambition
around the world who seek a rewarding career in accountancy, finance and
We support our 140,000 members and 404,000 students in 170 countries,
helping them to develop successful careers in accounting and business, with
the skills required by employers. We work through a network of over 80
offices and centres and more than 8,000 Approved Employers worldwide, who
provide high standards of employee learning and development. Through our
public interest remit, we promote appropriate regulation of accounting and
conduct relevant research to ensure accountancy continues to grow in
reputation and influence.
For further information, please contact: Colin Davis, ACCA Newsroom +44(0)20-7059-5738 email@example.com Hannah Smith, Ruder Finn for ACCA +44(0)20-7462-8949 firstname.lastname@example.org For further information, please contact: Gisella Porath CNDCEC International Affairs Piazza Della Republica 59 -00185 Rome, Italy Tel: +39-06-47863319 Fax 39-06-47863637 www. Commercialisti.It For further information or to request an interview, please contact: Taylore Ashlie Director, Communications CGA-Canada Cellular: +1-604-307-0212 Email: email@example.com
For further information, please contact: Colin Davis, ACCA Newsroom, +44(0)20-7059-5738, colin.davis at accaglobal.com ; Hannah Smith, Ruder Finn for ACCA, +44(0)20-7462-8949, hsmith at ruderfinn.co.uk ; For further information, please contact: Gisella Porath, CNDCEC International Affairs, Piazza Della Republica 59 -00185 Rome, Italy, Tel: +39-06-47863319 Fax 39-06-47863637; For further information or to request an interview, please contact: Taylore Ashlie, Director, Communications, CGA-Canada, Cellular: +1-604-307-0212, Email: tashlie at cga-canada.org
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