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Accountants can help small businesses

get back on track, in 4 strategic steps

By Karl Smith, Senior Education, Training and Member Support Manager, SAIPA

Business Rescue” and “liquidation” are unfortunately words that are too often used in public discourse, due to the devasting impact companies – with depleted cash reserves – have realized over the past two and half years.

With an increase of 44.8% business liquidations (Stats SA) and fewer businesses reported to have entered into Business Rescue, it seems that small businesses in South Africa are assessing financial positions too late – when they can no longer keep the doors open.

This is where Professional Accountants (SA) can be a company’s internal advisor, helping to re-strategize operations for better success and ultimately restoring financial wellness.

With small businesses employing between 50 to 60% of South Africa’s workforce and contribute around 34% of GDP, there is a new market opportunity and duty for Professional Accountants (SA) to provide advisory support to help keep small businesses on track and financially sound.

Accountancy professionals are trained to exercise judgment, engage in critical thinking and to have a deep understanding of complex multi-faceted operations and the resulting financial consequences. They are ideally suited to help small business owners and entrepreneurs identify their strengths, weaknesses, opportunities and threats, and create a plan to address them.

With global entrepreneurship high on our country’s economic agenda, here are several ways Professional Accountants (SA) can strengthen the small business sector and help companies to regain financial stability while wrestling through the tough economic climate.

REVIEW THE BUSINESS’ FINANCIAL STATUS

The pandemic could have exacerbated financial issues that a business was already experiencing, such as cash flow problems or decline in business activity that results from changes in the business cycle or broader economic pressure.

A professional advisor should assist in determining whether the business had any pre-existing conditions that are not necessarily related to the pandemic, but that may have been masked because of it. Once a clear picture of where the business currently stands is established, the advisor and owner can look at ways to stabilise business performance.

CREATE A RECOVERY PLAN

Cash flow management can be a deciding factor in a small business’s prospects of survival and ability to thrive. Cash provides liquidity, negotiation power, a security reserve and a hedge – although arguably a depreciating one during inflationary periods. Having reviewed financial health and objectives, accountancy professionals can offer practical advice such as where to access finance to keep afloat if you have a gap in working capital requirements, help identify areas where you could cut costs to free up cash flow, and so on.

RESTORE STABILITY

Having a good understanding of a business and how it operates, along with a familiarity with its financial strategy, helps advisors to plan its best next steps. While small business owners know their operations best, complexities such as taxes and debt restructuring are not always part of their daily operations. Partnering with an advisor who understands these processes in more detail and who can advise, will help restore stability.

TALK ABOUT THE MEDIUM- TO LONG-TERM VISION

Most of us have a sense that the pandemic has changed our world for good, but we are not entirely sure which changes will be permanent or which will dissipate. By partnering with professional advisors, SMEs can start to review which trends have had a positive or negative impact on their business and what strategies can be deployed to maximize on the positive changes.

The time for businesses to seek out and seize the opportunities emerging in the recovery is now. This involves conducting an after-action review to collect data and insights on lessons learned, and use these to prioritise actions to relook business models, enhance business value today and build strategic resilience for tomorrow.

Small businesses that take these steps now will be well-placed to capitalise more effectively on the opportunities rising – and to continue winning in their marketplaces as greater certainty and stability return.