Professional Accountancy Organizations: Serving SMEs Is Critical in Times of Economic Crisis

As professional accountancy organizations (PAOs), IFAC member bodies serve the public interest in a variety of ways. They contribute to standard setting, regulation, quality assurance, education, examinations, corporate social responsibility, and much more. But as Chief Executive Officer of CPA Ireland, I cannot stress enough the importance of providing direct support to small- and medium-sized entity (SME) owners, which I believe is in the public interest. This is especially true in times of economic crisis, when much of the focus is on big business and regulatory changes. PAOs can and should provide SMEs with critical research: practical guidance for decision-makers, surveys to reflect rapid changes in the marketplace, and best practices to indicate how the survivors are prospering and why.

Learning More from the Analysis of Success than the Anatomy of Failure

We can learn far more from the analysis of success than from studying the anatomy of failure. A recent report produced by CPA Ireland, Weathering the Storm – SME Lessons from the Crisis, examines recent SME experiences during the economic crisis in Ireland. Doubtless, many of those experiences, and the lessons we’ve learned, will resonate with SMEs around the globe. The report sets out lessons that can be learned from Irish SMEs who survived the recession, and factors that led to their survival and success. Success in business is not simply about avoiding mistakes, it is about making the right decisions at the right time. Those businesses and business people who have made good decisions can therefore offer valuable lessons. These include:

• The importance of speedy response—it is frequently the speed rather than the nature of the action that determines its effectiveness. Businesses that initiated the process of cost cutting and other remedial actions too late found themselves at reduced competitiveness.
• The importance of surgical cost-cutting measures—the main challenge facing businesses was not how much to cut but rather where to cut. Targeted cuts were seen as more effective than broad cost-cutting measures. This is an important part of the discipline required when making sacrifices.
• Open-mindedness is critical for adaptation—participants in our study indicated that they had a willingness to change the way they did business in order to meet the needs of the marketplace. They were willing to make modifications in their price and sales models.
• The fewer debts the better—Unsurprisingly, many of the businesses that survived the crisis did not have the burden of previously incurred large debts, especially debts from non-core business purposes. Banks are not really in the business of taking lending risks, thus working capital for firms with large amounts of debt had to be acquired from other sources, e.g., government. In the future, other resources may take the form of crowdfunding or other platforms.
• Open communication with staff—Business owners noted the effectiveness of engaging openly and honestly with staff in the formation of new strategies meant to address the crisis, in and pledging their commitments to such strategies. This was critical for maintaining trust and morale.
• Fortune tends to favor the brave—Companies that either maintained or increased their investment in marketing were rewarded for their courage. Also, companies that looked to export markets as a way of replacing lost customers at home also fared well.

One of the most interesting outcomes from the report is what it tells us about the character of SME owners. Courage, tenacity, resilience, resourcefulness, ingenuity and loyalty are a few of the characteristics shared by contributors to the report.

PAOs Should Never Lose Sight of the SME Community

I believe that providing support for SME owners is an important way that PAOs serve the public interest. In addition to providing webinars, information bulletins, and advocacy on public policy issues affecting SMEs, PAOS should make far greater use of research. Surveys and narratives collected from small business owners have much to offer. With modern technology, surveys easily and quickly provide snapshots of business owners’ sentiment and issues. In the same way, interviews provide insights into the real-life experiences of businesses and first-hand information long before it is re-interpreted into textbooks and/or best-sellers. PAOs have broad networks of financial decision-makers in a variety of industries to draw upon. For SMEs, who often do not have the kind of access to expertise that larger firms have, this is a vital service. For this reason, the PAO should provide more than just a one-way stream of communication; it should provide continuous reflections of the constituencies it serves. It should be nimble, deeply engaged with members (who are embedded in a network of intelligence), and ready to reflect the situation in real-time.

I can’t think of a better way for PAOs to help their SME members be better equipped for the next crisis.

Eamonn Siggins of CPA Ireland will address how PAOs are preparing to meet their members’ demands in the next five years at the World Congress of Accountants 2014  this November 10 – 14, in Rome, Italy (Session 1.13 – Perspectives from Member Body CEOs). He will be joined in a panel by Ardiana Bunjaku, Executive Director, Society of Certified Accountants and Auditors of Kosovo, Kosovo; Andrew Conway, CEO, Institute of Public Accountants, Australia; Shahied Daniels, CEO, South African Institute of Professional Accountants, South Africa; and Mark Farrar, CEO, Association of Accounting Technicians, UK. In addition, IFAC is conducting a global survey of small- and medium-sized practices (SMPs), and we encourage SMPs to participate. Your insights will give us and other PAOs invaluable information to help us better understand and address the needs and challenges faced by SMPs and your SME clients.