Globalisation’s impact on SMEs has significant implications for accounting practices, particularly the small- and medium-sized practices (SMPs) that typically serve SMEs, According to recently published Edinburgh Group (EG) report Growing the Global Economy through SMEs, SMPs may need to carefully critique the services they offer SMEs keen to internationalise, As a starting point, the report suggests specific actions for SMPs that include developing greater understanding and expertise internally, strengthening relationships with funding institutions and building international networks of trusted professional and business contacts.
SMPs have the potential to become a key agent for the – internationalisation of small businesses – if they are able to provide SMEs with the advice they need.
Globalisation of SMEs SMEs are a vital and integral part of the global economy. According to the OECD, they account for the majority of private sector employment and GDP, as well as a disproportionately large share of new jobs, and are a major source of entrepreneurship and innovation, Increasingly, these SMEs are becoming part of the global business community.
SMEs now manufacture products and provide services in many countries, and sell to customers and clients around the world – just as large multinational companies have been doing for decades.
The EG report reveals a significant amount of international activity across the SME sector. Almost 75 per cent of the SMPs it surveyed have clients whose business includes some international aspect, even if that is simply buying goods or services from abroad.
Role of SMPs While globalisation presents great opportunities for SMEs – not the least of which are new markets for their goods and services – it also poses significant challenges. Perhaps the greatest challenge today’s SMEs face is a lack of human capital, including managerial expertise, and a paucity of financial resources that empower them to take advantage of international opportunities.
IFAC research indicates that SMEs will likely look to SMPs, their trusted business advisers, to fill this resource gap. The EG report suggests that SMPs take steps now that enable them to capitalise on opportunities created by the increasing internationalisation of small business.
Recommendations for SMPs from the EG report
The Edinburgh Group report makes the following seven recommendations for SMPs:
. Provide more proactive support | including support in identifying the most attractive, fast-growing overseas markets – to SMEs planning to internationalise.
. Develop knowledge banks and information resources to guide SMEs through the red-tape challenges associated with international activity and help them access all appropriate sources of funding.
. Build relationships with banks and other key financiers of international investment and trade to facilitate introductions between these funding sources and SME clients.
. Identify where SMEs are Z dealing in foreign currency and seek opportunities to provide value-adding advice in areas such as managing foreign-exchange risks and forecasting currency needs.
. Consider additional networking opportunities that might facilitate productive relationships with other professionals or connect SME clients with one another to create mutually supportive environments and information channels.
. Assess how the proactive delivery of services to SMEs with international ambitions could help grow practice income, strengthen client relationships and enhance the firm’s wider reputation.
. Consider whether developing the international resources available to your practice – for example, by participating in an international network of accountancy firms – could benefit the firm itself and its SME clients.
Increasingly, SMEs are being integrated into the global business community. For SMEs to maximise the opportunities that flow from this internationalisation, they need timely advice. SMPs are well placed to provide this counsel.
Online resources
IFACs website hosts arrange of resources and tools to help SMPs implement these recommendations. By employing these, SMPs can stay ahead of the curve, enhancing their practice management and building their capacity to offer international business advisory services. For information, go to:
. Resources and Tools in the SMP area of the IFAC website at ifac.org/SMP
. the SMP Committees Delicious page at delicious.com/ifacsimpcommittee, which features bookmarked links to relevant free resources: filter by Practice Management (especially Module 2 on networks) and Business Advisory.
