Accountants: Partners For SMEs’ Growth
BY LAWRENCE LOH
- The accounting industry is poised to play an increasingly pivotal role in business advisory and strategic planning.
- As SMEs digitalise, there are rich opportunities for accountants to embrace digital solutions for business efficiency.
- Sustainability and regional expansion are key business goals that accountants can develop capabilities in, to add value to SMEs.
Accountants today have an increasingly pivotal role in businesses’ strategic planning and decision making. As accounting technologies become more sophisticated and yield greater analytical insights, the industry is well placed to proactively support business performance.
Small and medium-sized enterprises (SMEs), in particular, account for 99% of enterprises in Singapore and are key drivers of employment and innovation. As SMEs thrive and transform, it will be all the more essential for the accounting industry to adapt in tandem.
What lies ahead in the business landscape? UOB’s “ASEAN SME Transformation Study 2022” reveals that SMEs in key ASEAN markets have their sights set on three growth ambitions in the next few years: digital transformation, sustainability and regional expansion.
Some 66% of businesses plan to increase spend on digitalisation, spurring automation of business operations including manual accounting processes. Meanwhile, as sustainability becomes an increasing priority for SMEs, accountants have a role in reporting businesses’ sustainability initiatives and impact. Finally, with more SMEs venturing into the region and beyond, we need accountants to complement the business needs and challenges of expanding into new markets.
Accountants can be partners with businesses as they expand to tap on more opportunities. These are the three overarching business needs that accountants can explore to deliver enhanced value:
1) EMBRACING DIGITAL TRANSFORMATION IN ACCOUNTING
SMEs in ASEAN are rapidly seeking to digitalise to gain a competitive edge. Almost two-thirds of SMEs plan to continue digitalisation as a growth strategy, according to the “ASEAN SME Transformation Study 2022”.
There is no doubt that this digital transformation will reshape the accounting department as well, with 47% of surveyed SMEs reporting a focus on digitalising their operational processes. Indeed, accounting is a top digitalisation priority for one in three SMEs in Singapore.
Artificial intelligence (AI)-backed automation can drive efficiency in accounting, supporting accountants in providing businesses with timely, up-to-date financial information. It can reduce errors and streamline time-consuming tasks such as manually entering data, categorising transactions, verifying information, and even generating financial reports.
But convenience and speed are just the start of the possibilities unleashed by these emerging technologies. With the rise of big data and advanced data analytics in accounting, accountants increasingly have the tool sets to unearth valuable business insights from financial figures. Data analytics tools and machine learning can enable accountants to analyse massive data sets at speed to provide businesses with a forward view of their financial health.
For instance, AI will help tax accountants to detect potential tax risks arising from changes in tax regulations and to formulate preemptive, customised solutions for businesses. Backed by AI and machine learning, data analytics tools will also enable accountants to recognise emerging financial risks from data trends, propelling businesses to act fast to minimise risk.
As data-driven decision making comes to the forefront in accounting, accountants can increasingly add value to enterprises’ financial planning and forecasting. In short, the role of the accounting professional is set to evolve towards business advisory.
At present, businesses’ expectations of the industry are shifting. Based on a 2022 “Manpower Study Of Singapore-Based Accounting Practices” commissioned by the Singapore Accountancy Commission (SAC), accountants are expected to provide more advisory and preemptive services, ranging from better financial information analysis to recommendations for improving accounting processes.
Businesses will have an urgent need for data-savvy accountants to stay resilient in a digital future. With more companies investing in digitalisation, today’s accountants can take advantage of user-friendly tools like analytics automation platforms to unlock data insights. By embracing these emerging technologies, accountants can better support businesses’ transformation and growth.
2) THE RISE OF SUSTAINABILITY ACCOUNTING
ESG (environmental, social and governance) factors are an increasing focus among today’s organisations. This rising concern about the planet, people, and profit has far-reaching impacts on the accounting industry.
Sustainability is currently a strategic priority for nearly two-thirds of SMEs in ASEAN, as shown by the “ASEAN SME Transformation Study 2022”. As SMEs embark on their sustainability journeys, there is plenty of room for accountants to take on new strategic capacities in sustainability reporting, green finance, and more.
Currently, 35% of SMEs remain in experimentation mode, with only limited adoption of sustainability practices across their businesses. As the study reveals, one top barrier to implementing sustainability practices for SMEs is high initial costs. The accounting industry can act as an important partner in spurring these budding sustainability efforts, especially by supporting SMEs in managing cost-related challenges.
For one, accountants need to work closely with banks that shape the disclosure standards for green financing solutions. Through providing funding and seeking measurable financial and ESG results, banks can help SMEs ensure that their sustainability efforts are sustainable. Accountants who understand sustainability reporting will be able to help enterprises work with issuing banks. By guiding SMEs in the still-nascent area of sustainability disclosure, accountants enable enterprises to communicate how they create sustainable business value to banks, investors, and other stakeholders.
Currently, only 34% of SMEs across ASEAN are focused on sustainability reporting and measurement, reveals the study. SMEs will need stronger support from accounting partners to evaluate, enhance, and drive success in their sustainability performance.
3) PREPARING FOR OVERSEAS EXPANSION
As the ASEAN economy recovers post-pandemic, small businesses are showing a growing appetite to expand their footprint overseas. In UOB’s “ASEAN SME Transformation Study 2022”, 74% of SMEs expressed a keen interest in regional expansion into ASEAN and beyond.
Despite its risks, overseas expansion means SMEs have access to bigger markets, more revenue, and more talent. They can also build ties with clients based abroad and strengthen operations through diversification, based on the competitive strengths of each country.
International expansion comes with a complex set of accounting challenges as subsidiaries must adhere to local accounting rules, keep up with different tax policies, and ensure compliance with various regulations. So, as SMEs set their sights on cross-border growth to tap on new opportunities, they will need a broader understanding of accounting systems for international businesses. Accountants can play a crucial role to assist SMEs in their regional growth, such as in scale and complexity of operations transactions, revenue streams, and overseas employee-related finances. It is also critical for accountants to guide the management in ensuring proper legal and regulatory compliance to repatriate cash flows back to the headquarter country of operations.
Consolidating financial data across different countries can be complicated. For instance, accountants who serve enterprises operating in China follow the Chinese Accounting Standards (CAS), which differ from the International Financial Reporting Standards (IFRS).
As a starting point, professionals can look into keeping themselves apprised of the relevant accounting systems in their key countries of interest. Thailand, Indonesia, and the Philippines are businesses’ top three markets of interest for regional ventures in the next three years, based on the study. For expansion beyond ASEAN, China, Japan, and South Korea are the key markets that SMEs are most interested in breaking into.
PARTNERING FOR SUCCESS
In a fast-evolving business environment, enterprises need support from accounting partners to stay ahead of the curve. As an important pillar of all businesses, accountants can take on a more pivotal role in the companies’ strategic planning especially as enterprises chart new paths in digitalisation, sustainability, and overseas expansion.
With a stronger partnership at the strategic level, businesses and accounting partners will be able to respond dynamically to new opportunities ahead.
Lawrence Loh is Managing Director, Head of Group Business Banking, UOB.
This article was first published by ISCA at the following URL: https://journal.isca.org.sg/2022/11/23/accountants-partners-for-smes-growth/pugpig_index.html