Independent accounting practices vital to achieving the NDP's SME goals

By 2030, if the National Development Plan (NDP) has performed the way the National Planning Commission (NPC) hopes it will, 90% of the jobs it has created will be in small and medium enterprises (SMEs). That depends to some extent on the NPC convincing parliament to deliver the "regulatory reform and support" which the NDP vision statement admits is necessary to "boost mass entrepreneurship." In response, government has consolidated all its small business units into one, the Small Enterprise Finance Agency (SEFA), now a division of the IDC.

However, government cannot stimulate this growth on its own. To achieve the NDP vision, the private sector needs to commit to it and play a role in supporting SMEs through financing, skills development, business mentoring and synergistic partnerships.

The South African Institute of Chartered Accountants (SAICA) has recognised that it also has a role to play. While many of its members work in big national firms (or the public sector, like SEFA CEO Thakhani Makhuvha), many others are independent chartered accountants [CAs(SA)] working in small and medium practices (SMPs). SAICA encourages SMPs to extend their services to SMEs beyond "keeping the books" or preparing an annual audit. This is based on a 2013 survey of five major SA banks and three specialist SME lenders, in which all agreed that a CAs(SA) input would be of value to SMEs in several areas, from acquiring finance to risk assessment.

Financial fitness and business planning

When assessing an SME's creditworthiness, the respondents all revealed that they automatically trusted financial reports prepared by CAs(SA) more readily than those prepared by the business itself or other independent accounting services provides. "Figures signed off by a CA(SA) have more credibility," said Oscar Siziba of ABSA. In addition, CAs(SA) have intimate knowledge of the various lenders' criteria and the indicators they examine to determine a business's "financial fitness" - these include cash-flow, management of debtors and timeous credit payments, for example. "If a CA(SA) were to present a risk assessment report," said Christo Botes of Business Partners (SA's biggest private-sector lender to SMEs), "It would help us understand the business risk as well as the mitigating options." An SME needing funding for any reason - acquisition, growth, gearing or even an exit strategy - can improve the chance of success by consulting a CA(SA) when preparing their credit application.

The lenders surveyed were also supportive of CAs(SA) providing general business advice, or even performing the same role as a non-executive director (without a formal appointment, as most SMEs are too small to require a board of directors). Small business owners often find themselves overwhelmed by the day-to-day operational details of the company, too busy to do exactly the kind of long-term business planning in which a CA(SA) will have expertise. "SMEs get into a windmill of doing stuff, and don't see how they could grow. They're chasing sale after sale, but they never sit back and say, 'This is where I want to take the business in two years time'," said Kandis Swanepoel of Nedbank. "Everybody always says funding is the biggest pain point for entrepreneurs. I think it's more the soft issues - the coaching, the mentoring, the consulting. 'How do I register a company?' 'How do I create a business plan?'"

Achieving the aims of the NDP requires energetic collaboration between public and private sectors. In the small business arena, SAICA hopes that SMEs will see the value of consulting a CA(SA) for both business and financial advice - such advice is in fact an investment in business growth.