Empowering SMEs for success: Why Accounting matters today more than ever
Essam Ahmed
SMEs (small- to medium-sized enterprises) are the cornerstone of any economy. They not only account for job creation opportunities but also help the economy move by connecting larger enterprises to consumers and enabling supply chains. According to the World Bank, SMEs constitute about 90% of the businesses and more than 50% of the employment worldwide. The challenge, however, is to maintain a consistency in the overall ecosystem for SMEs and MSMEs (micro, small and medium enterprises) that facilitates growth which is both sustained and profitable.
Today, SMEs are faced with many challenges that are dampening their growth prospects. While external factors, such as geopolitics, market competition, technological advancement, and regulatory policies, can impact small businesses, business owners also grapple with various internal challenges like talent and technology. Of these internal challenges, the one that stands out most is financial management.
However, with contemporary financial management tools such as management accounting reports, SMEs are changing the business landscape and ensuring sustainable growth for their organization.
Why an SME should have a structured management accounting reporting system
In the financial landscape of SMEs, the difference between a business that is doing well and one that is struggling to are the accounting and financial reporting measures they have in place. It is the data that emerges from employing these practices that paints an accurate picture of a business’ financial health, helps identify trends and encourages informed decision-making that contributes to its bottom lines. Not having them takes away from SMEs’ ability to identify bumps in strategic decisions and (or) resource utilization.
According to a report by the Kuwait Foundation for the Advancement of Sciences (KFAS), SMEs are perceived as ‘lacking financial skills’ by financers. Bridging this trust gap requires financial statements to reflect a company’s performance accurately and transparently, which could be achieved through measures such as cost accounting and management accounts reporting. And, despite the complexities involved in setting up financial reporting and accounting measures, businesses must fulfil regulatory obligations regularly.
This is all the more important when you consider that Kuwait’s financial regulatory landscape is as dynamic as it is. And, non-compliance for SMEs could mean heavy fines as well as reputational damage.
However, this is only one part of a larger challenge as this non-compliance also points at discrepancies in accounting and business disruptions that could be inhibiting an SME’s growth but could be overcome using adequate financial expertise.
Moreover, efficient accounting and financial reporting can also help SMEs better their internal operations. For instance, using processes such as management accounts reporting, SMEs could look deeper into their businesses’ overall performance or choose to go more granular and analyze how they are performing on a department-level. It essentially serves as a top light, highlighting areas where processes are inefficient or where resources are misallocated and (or) underutilized so you can maximize their overall efficiency.
Final thoughts
In conclusion, when SMEs manage internal challenges well, it becomes easier for them to tackle external challenges. That is why having the right accounting and financial reporting measures should be a strategic imperative for them. It is these measures that set the premise for making informed decisions, building trust and credibility, navigating regulatory compliance, maximizing operational efficiency, and facilitating strategic planning.
However, looking ahead, more digitalization is anticipated as are the challenges and opportunities in Kuwait’s regulatory landscape.
Therefore, for businesses aiming to thrive in the SME ecosystem, it is crucial that they prioritize accurate accounting and financial reporting and view it as a non-negotiable investment for their future rather than an immediate payoff.
For more details, visit kpmg.com/kw.
Provided by SyndiGate Media Inc. (Syndigate.info).