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    Access to FinAnce For the smAll

    And medium sized enterprise sector

    evidence And conclusions

    October 2009

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    s all a d diu iz d bu i (sme ) arou d h world ar faci g h ir bigg

    chall g a a r ul of h global co o ic i ua io .

    Access to Finance or the Small andMedium Sized Enterprise SectorEvidence and Conclusions

    In order to establish the global scale and nature o thechallenges acing SMEs, three leading internationalaccountancy bodies ACCA (the Association o CharteredCerti ed Accountants), the Certi ed General Accounta ntsAssociation o Canada (CGA-Canada) and CPA Australia have jointly sponsored a survey by the Economist IntelligenceUnit (EIU) which examines a range o issues including the impact o credit shortages, the constraints which businessesexpect to ace in the coming years and their assessmento the efectiveness o government intervention.

    In those countries hit hardest by the economic downturn ,banks have cut lending, and are in many casesbeingaccused o not passing on interest rate cuts designedto help economies recover. Businesses experiencingweak demand or their product and services are acedwith tough decisions on investment and sta ng levelsand the best structure to enable them to survive andcompete in the uture.

    Yet across the world, policymakers look to the SMEsector or resilience and innovation in the ace o these

    challenges to lead their economies out o the currentdownturn. Based on this research, the three bodies willmake recommendations to policy makers and employer sabout the initiatives which should be taken to ease thesituation or this crucial sector. They will also highlightthe ways in which nance pro essionals can assist SMEs

    to emerge rom the recession and be in a position tocapitalise on the increased demands which the EIU

    ndings predict or 2010/11. Many entrepreneurs areacing an economic downturn or the rst time and

    it is crucial that they be given the support and skillsneeded to get through it.

    Pro essional bodies working together

    The decision to work together by ACCA, CGA-Canadaand CPA Australia, who between them represent nearly700,000 nance pro essionals and trainees worldwide,re ects the importance o the challenges acing SMEstoday. The three bodies believe that through their reachand insights, they can create an international plat orm,bringing together policy makers, business and otherstakeholders, to highlight the importance o SMEs andtheir contributions to economic development aroundthe world and the issues and concerns acing them.

    All three bodies have a long history o supporting SMEs.

    With many thousands o members working in or orsmall and medium sized businesses all three bodies alsohave a clear understanding o the concerns, constraintsand opportunities o the sector. Accountants areprimary business advisers to SMEs in areas relating toaccounting, nance and broader business matters. They

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    help to promote business con dence with investors,lenders, customers and suppliers.

    Each body has campaigned on SME issues and bytackling these issues together, the three bodies willbring a wide range and depth o expertise to thedebate. This is an issue which all bodies believe is toolarge to be spearheaded by a single organisation andby working together they can more efectively highlightthe problems con ronting SMEs on a global level. With SMEs accounting or at least 95% o enterprises,it is critical that they remain at the ore ront o globalpublic debate.

    The Economist Intelligence Unit

    The Economist Intelligence Unit (EIU) is the worldsoremost provider o country, industry and management

    analysis. Founded in 1946, the Economist IntelligenceUnit is now a leading research and advisory rm withmore than 40 o ces worldwide.

    Its extensive international reach and its independencemake the EIU the most trusted and valuable resource

    or international companies, nancial institutions,universities and government agencies.

    Integrating the evidence base In order to complement and put into context the

    ndings o the EIU survey, this report also brings

    together selected ndings rom a wide range o rigorous SME research projects around the world. Itdraws especially rom the most recent large-scaleSME and membership surveys carried out by ACCA,CGA-Canada and CPA Australia:

    The ACCA Global Economic Conditions Survey(August 2009)

    The CGA-Canada Small Business Survey 2009,conducted by Synovate (September 2009)

    The CPA Australia Asia-Paci c Small Business Survey2009 (September 2009)

    For fur h r i for a io , pl a co ac :Colin DavisHead o International CommunicationsACCA Tel: +44 (0) 207 059 5738Mobile: +44 (0)7720 [email protected] Barbara CameronVice President, Public A airsCGA-Canada Tel : 1 604 605-5147Mobile: 1 604 [email protected]

    Adam Blight

    General Manager External A airsCPA Australia Tel : +61 (0)3 9606 9697Mobile: +61 (0)422 003 [email protected]

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    Governments and banks:

    SMEs are an integral part of national economies.Having o ered considerable support to this day,governments must not lose sight o their SMEagenda as the recovery nally gets underway, as

    ocused support or this sector will be importantto achieving sustainable economic recovery.

    As developing nations continue to enjoyrelatively strong economic growth, governmentso developed nations must resist growing calls toimpose protectionist measures aimed at protectingbusinesses in their own countries.

    Uneven growth rates across di erent countriespresent an opportunity, not a threat to SMEsand their national economies. SMEs must beencouraged and supported in their e orts to tapgrowing oreign markets through a wide rangeo instruments, rom credit insurance guaranteesto tailored regional advice and networkingopportunities.

    Governments must remain ocused on encouragin gemployment in small business through appropriateregulation, selected scal incentives and reasonable labour market exibility. They must not lose sight

    o their skills and regulatory re orm agendas, eventhough the case or both has been dented somewha tby the recession.

    Governments will need to encourage asset andequity nance, including business angel investment . This is a matter o stimulating demand as much asit is o encouraging supply building the capacity

    or SMEs to understand these sources o nance,choose suitable modes o nancing rom the ullrange o options, and make themselves attractiveas recipients o non-bank nance.

    Early signs of recovery could prove misleading andpolicymakers need to remain on the alert at leasttill 2011.

    Uncertainty about future credit conditions is anobstacle to investment. Policy-makers and lendersshould try to provide more clarity by publishingmore in ormation, both backward- and orward-looking, on trends in lending and what lendersrequire rom business loan applications.

    Governments must appreciate the skills aspect of the challenge or managers and owners o SMEsand provide support accordingly. Many SMEs areexperiencing their rst recession; they are havingto re-learn nance and reconsider how they dobusiness. There is scope or supporting this learningprocess through subsidised training or advice.

    Policy-makers need to be conscious of businessinvestment as a barometer o the economicrecovery. Rising con dence and GDP growthmay not be sustainable unless SMEs eel secureenough to hire and invest.

    Key Recommendations

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    Governments need to consider the full array of tools available to them in order to encourageinvestment and innovation among SMEs romtax incentives and development o work orceskills to public procurement and publicly

    unded research.

    Banks risk losing the trust of SMEs unless theyempower their sta to manage SME relationsand better understand clients. Where banks areunable or unwilling to do so, accountants shouldbe prepared to mediate between lenders andborrowers.

    Businesses:

    Businesses need to recognise their customerrelationships as a strategic asset and address them

    ormally as they would any valuable intangibleasset. Both governments and practitioners in a broad range o pro essions have a role in educatingSMEs on how to manage and protect such assets.

    Businesses need to carefully consider what skillsand capacity they will need as the recoverygets underway: without investment, assumedproductivity gains could ail to materialise. It i s

    important to plan these resources in the mediumand long-term, otherwise short-term optimisationscould do more harm than good.

    While cost-cutting will be necessary for manySMEs in the near uture, it is important that this bea disciplined exercise, based on solid businessplanning. Knee-jerk reactions can damage theprospects o a business and, on a macro scale, jeopardise economic recovery

    SMEs should continue to focus on improving theircash position and pro tability. This will provide apotential source o internal nance, which may beimportant i the current credit conditions persist.

    In some markets, particularly in the US and Europe,the levels o lending seen in 2007 were simply notsustainable. Businesses there should prepare or theeventuality that credit conditions will never recoverto 2007 levels and consider how this prospecta ects their business planning

    Businesses and governments have a rare opportunit yto tap into the potential or equity investment intoSMEs. While supply will be tight at the institutionallevel, individual investors such as business angelscan o er an alternative to bank nance i properlyincentivised.

    With asset prices still depressed, SMEs that ndthemselves in a strong nancial position should

    consider opportunities to expand by acquiring competitors, opening new premises or investing innew assets. With the right pro essional advice, many smaller businesses could nd excellent opportunities in these daunting economic conditions.

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    SMEs are continuing to grow in spiteo the downturn

    Despite challenging economic and nancial conditions,the SME sector is generally growing in terms o bothrevenue and employment and expects to grow asterstill as the global economy continues to recover. TheEIU study adds to a substantial body o evidencedocumenting the resilience o SMEs. Past recessionshave seen smaller businesses lead many o the worldsmajor economies back into growth1, and enterprisecreation is understood to contribute signi cantly toeconomic recovery.2 I SMEs are to play their part,however, they will need reliable sources o nance.

    SMEs3 represent around 99% o enterprises around theworld, account or more than hal o all private sectoremployment in the OECD 4, produce 40-50% o theeconomic output o afuent countries, 5 and are responsible or a very large share o new job creation.6 The return o robust SME growth is there ore onepre-requisite or economic recovery. O course, i thelast two years have proven anything it is that growth

    alone is not always an indication o health. Looking at abroader range o health indicators, it is clear that weak cash positions will present a serious challenge or thesector in the medium term, and pro tability will takemuch longer to recover than revenue.

    We also note that the strength o customer relations isseen as the most promising aspect o SMEs per orman cegoing orward. While not surprising, this nding suggests that SMEs customer relationships are in themselves avaluable asset. Like many o the intangible assets ownedby SMEs, however, we are concerned that their natureand value are o ten poorly understood by their ownersand not always ully appreciated by other stakeholders,including lenders.7

    th gra i alway gr r These headline ndings conceal very substantialregional variations. The EIUs ndings suggest that theeconomies o the Asia-Paci c region, as well as A ricaand the Middle East, will outper orm the rest o theworld as the economic recovery un olds. This is in linewith the emerging consensus and also consistent with

    1 P. Davidsson, L. Lindmark and C. Olo sson, SMEs and job creation during a recession and recovery in cs, Z. J., Carlsson, B., Karlsson, C. (eEntrepreneurship, small and medium-sized enterprises, and the macroeconomy, Cambridge, 1999; M.A. Carree and A.R. Thurik, Small rms andeconomic growth in Europe Atlantic Economic Journal, 26:2 June 1998; C. Parsley, E. Dreessen, Growth rms project: Key Findings IndustryCanada Small Business Policy Branch, August 2004; Johnson, D., Kenyon, P., and Ha, V. Employment growth by rm size categoryLabour Economics and Productivity, 7:1 pp. 49-72, 2005.

    2 P. D. Koellinger and A. R. Thurik, Entrepreneurship and the business cycle Tinbergen Institute Discussion Paper, August 2009.3 These gures consider all enterprises satis ying the criteria or SME status in their home countries. As such they will overestimate the importan

    o SMEs relative to gures produced under a standard de nition.4 OECD, The impact o the global crisis on SME and entrepreneurship nancing and policy responses July 20095 M. Ayyagari, T. Beck and A. Demirg-Kunt, Small and Medium Enterprises across the Globe March 20056 OECD, SME and entrepreneurship outlook February 2007.7 Valuing intangible assets in SMEs ACCA SME Committee, December 2006 and C. Martin and J. Hartley, SME intangible assets ACCA Rese

    Report 93, December 2006

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    recent ndings rom ACCAs latest Global EconomicConditions Survey which saw these two regions returnto positive territory in terms o business con dence.8 In

    act, many o these economies have sustained positivegrowth rates throughout the downturn and are not somuch recovering as re-accelerating.

    This local growth presents opportunities or SMEsaround the world. Yet 44% o the SMEs surveyed by EIUsaid that the nancial crisis had dented their capacity toexpand into new markets. Interestingly, this percentagewas actually marginally higher (45%) among thoseSMEs that were the most con dent about their uturerevenue growth. Clearly, alling demand combined witha disruption in trade nance and credit insurance, hastaken its toll on exporters and it may take a great dealo support to restore con dence in this area.

    A o o ployAccording to the EIU study, the SME sector has managed to create jobs throughout the worst global downturnin post-war history and expects to do so over the nexttwo years. In the Asia-Paci c region and A rica, wheremany national economies have returned to growth,61% and 60% o SMEs respectively expect to increasetheir headcount; so do 40% o SMEs in Europe and North America.

    While this is remarkable and encouraging, we mustnote that the employment outlook or 2010-11 is quiteconservative, especially when considered against the

    expected increases in revenue. Even among the mostcon dent SMEs in terms o revenue, there is a substantia lcore o employers who do not expect to grow theirheadcounts in 2010. Unless investment by SMEsrecovers sharply, resulting in strong productivity gains,these gures will be hard to reconcile. Some businessesmay well nd themselves under-resourced in therecovery.

    SME employment is, however, most important in macroterms; an increase in the average headcount could havedramatic e ects on consumer demand and economicconditions in general. The result could be a virtuous cycle o employment leading to stronger demand leading tohigher employment a reversal o the vicious cycletriggered by the credit crisis. So ar, both SMEs and largerbusinesses have in many cases laid of staf pre-emptively in anticipation o worse times ahead, even though theirrevenues and nances had not yet taken a hit. In manycountries, this behaviour has uelled a downward spiral,accelerating and deepening the downturn.

    8 ACCA Global Economic Conditions Survey Survey Report Q3 2009 August 2009.

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    Access to fnance or SMEs hasbeen squeezed.

    Broadly speaking, the EIU study reports a pain ulrationing o nance, most notably by banks. Thisresonates with the experiences o our members,accountants and small business advisers, in a numbero countries though by no means all.

    Although there are signs now that the supply o externalnance to SMEs is stabilising, the credit crunch is stillar rom over. O particular concern is the act that

    employment among SMEs is extremely sensitive to thesupply o nance. According to the EIU survey, bothSMEs acing tough credit conditions and SMEs acingsevere cash ow problems are almost three times aslikely to lay o sta as those not so a ected.

    A large number o actors can contribute to a rationing o small business credit: Lenders may be under-capitalised,or extremely risk-averse, or they may still be acinga heightened cost o capital. Falling asset prices cancontribute to the credit squeeze i they a ect asset scommonly used as collateral by SMEs. Expectations o reduced growth and pro tability in the SME sector andincreases in SME insolvencies and the incidence o latepayment can, where they occur, reduce the supply o

    nance. On the other side, many SMEs have responded

    to the downturn in demand and the reduced availabilityo nance by rationing their demand or nance.

    The above e ects have not always coincided, and theirintensity has varied between regions. As a result thecrisis has a ected SMEs to a varying extent in di erentmarkets. Australia and to a lesser extent, Canada provideexamples o afuent nations in which the impact o thecredit crunch has been comparatively mild.

    In Canada, or instance, although the national economyshrank by 3.2%9 rom July 2008 to June 2009, over 60%o SMEs indicated that their access to nance hasremained unchanged or improved over the past ewyears. More than 50% have indicated that the creditcrisis has not kept them rom expanding into new markets, products, and geographic segments.10

    Equally important is the act that the amount and typeso nance used vary substantially between SMEs o di erent sizes and sectors as well as between di erentregions. Smaller SMEs, SMEs in the services sector, aswell as those relying on less developed nancialsystems, tend to use equity nance, and employ various

    nancial bootstrapping methods, including cashmanagement, rather than relying on debt. All o theseSMEs will not have been a ected by the credit crunchto the extent that their leveraged counterparts have.For instance, CPA Australias Asia-Paci c Small BusinessSurvey ound that only 20% o Australian and Singaporeansmall businesses had an existing business loan, against

    34% o Hong Kong and Malaysian small businesses.11

    9 Statistics Canada, Canadian Economic Accounts: Second quarter 2009 and June 2009 September 200910 The CGA-Canada Small Business Survey 2009 Synovate, September 200911 The CPA Australia Asia-Paci c Small Business Survey 2009 CPA Australia September 2009

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    In act, due to their relatively low reliance on bank lending, the smallest businesses have been largelyuna ected by the rationing o nance, even in the hardest-hit countries (although they have been hit hardby the downturn in demand brought on by the creditcrisis). In the UK, or example, only 19% and 34% o SMEsrespectively consider access to nance or cash ow tobe the main constraint they ace.12

    The EIU survey instead ocused on users o externalnance these tend to be larger and aster-growing

    than the total SME population, so it is likely that theviews o medium-sized businesses have heavilyin uenced some o these ndings. These insightsare important as larger SMEs are key supply chainparticipants and account or a disproportionate shareo employment and economic activity. We appreciate,however, that the perspectives o larger and smallerSMEs can di er substantially.

    Focu o advic The EIU ound that SMEs have mostly turned to theirbanks or advice during these di cult times aninteresting nding given the amount o animosity thecrisis created between small businesses and banks insome o the worst-hit countries.13 The EIU survey itsel

    ound that 82% o SMEs believed that banks were notdoing enough, or instance, to pass on interest rate cuts.

    To some extent, this marked contrast may be due to thesize o the SMEs surveyed by the EIU. Medium-sized andlarger rms with su cient internal resources to maintainstrong banking relationships have made a point o strengthening these during the downturn.14 For smallerSMEs, however, this is not always the case: sources o advice vary widely and there is a need or mediators o the SME-bank relationship. These are most commonlyaccountants.15

    Yet despite the constructive approach highlightedby the EIU ndings, there is also evidence o a ri tbetween banks and their SME customers, with the lattercomplaining o an increasingly ormulaic, one-size- tsall approach to lending on the part o lenders thatdisadvantages new customers, those with complexneeds and good businesses in industries associatedwith high risk. This is corroborated by recent research bythe International Federation o Accountants (IFAC) andThe Banker . The IFAC/ Banker survey ound that lendersdo not value in ormation industry trends and clientsbusiness plans nearly as much as they do cash owstatements, collateral and transaction histories andthat this gap is set to widen over the next 1 - 2 years.16 This could jeopardise the banking relationships o SMEs at a crucial time, as their bank managers areincreasinglyunable or unwilling to get to grips withthe undamental s o their clients.17

    12 Open University Business School, Quarterly Survey o Small Business in Britain Q3 2009 September 2009.13 See or instance FPB and Graydon UK, Financial advice and smaller businesses November 2008.14 CFO Research Services, The CFOs new environment ACCA July 2009.15 A. Berry, Banks, SMEs and accountants an international study o SMEs banking relationships. ACCA Research Report no. 95, 2006.16 IFAC/ The Banker Supporting small and medium-sized companies inThe Banker , October 200917 This trend and its e ects on trust has already been documented, pre-credit crunch, by international survey ndings in Berry, op. cit.

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    However, the IFAC/ Banker survey also ound that around60% o lenders were likely to look more avourably uponSME loan applications when the would-be borrower hadengaged the advice o a pro essional accountant.18

    no by d b alo Though banks appetite or lending and SMEs appetite

    or borrowing may have ebbed, the capital needs o many SMEs remain the same; the levels o growth

    orecast in the EIU survey, while not dramatically high,will still require nancing. So ar, other providers o

    nance have not stepped in as banks withdrew romthe SME market. Unless alternatives to bank lendingare encouraged by policymakers, much o the growthenvisaged by SMEs may not materialise. This will involvepolicymakers both encouraging supply, or instancethrough appropriate tax incentives or equity investors,and developing demand, by increasing awareness o these sources o nance among SMEs.

    Small frms are cutting costs andimproving cash management.

    Given the twin pressures o the credit crunch and allingdemand, it comes as no surprise that SMEs are lookingto cut costs and stay on top o their cash ow. Failingcustomers, late payment and poor access to nance

    are placing substantial strain on SMEs cash positions.

    It is regrettable, however, that only a raction o thecost-cutting e orts o SMEs are accompanied by a

    ormal cost-cutting plan. Unless pursued strategicallyand in a disciplined manner, cost-cutting can damage the capabilities o the business as the recoveryapproaches. Because banks and other lenders will notbe best positioned to advise on such programmes,accountants in both industry and public practice needto consider how they can best add value to thecost-cutting process.

    The rediscovery o cash management makes customerand supplier relationships even more important. A tercost-cutting, renegotiating payment terms with supplier sand customers were the most common responses topoor cash ow. Given the strength o supplier-customerrelationships as emerges rom the EIU ndings, therecould well be potential or urther innovations inthis area.

    Although it has been a pain ul transition rom easycredit to cash is king, we welcome the nding thatSMEs appear to be quickly learning the right lessons. The EIU survey ound that, in 30% o cases, SMEs cashpositions were completely una ected by the nancialcrisis. But or every SME that entered the downturncash-rich and emerged cash-poor, two have done thereverse. The numbers o the latter (10%) are still low,but this partly re ects the magnitude o the challenge:credit rationing, where it has occurred, is a condition

    most entrepreneurs will be un amiliar with, and, a teryears o easy credit, cash management skills are naturallylacking among many smaller businesses.

    18 IFAC/ The Banker , ibid.

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    Finally, it is important to remember that cash management is no panacea. For some business models, external

    nance is very hard to substitute. Even among thos eSMEs that were the most con dent about improvingpro tability, one in nine (11%) appear unable to survivewithout any external nance.

    To preserve cash, SMEs are postponinginvestment.

    While regrettable, the act that so many SMEs arepostponing investments in the ace o weak demandand tough credit conditions is not surprising. Someinvestment that would have made sense in growingmarkets simply does not in shrinking ones. That said,survey evidence suggests market ailure is also at playalongside more rational considerations, with substantialnumbers o SMEs and their advisers seeing allingvolumes o investment even where pro tableopportunities have not dwindled. ACCAs Global Economic Conditions Survey recently ound that 38%o SMEs/small to medium sized accounting practiceshad seen a decrease in the availability o capital withouta corresponding decrease in the number o pro tableinvestment opportunities.19

    These trends could be sel -de eating. Many sectors

    rely heavily on capital investment or growth and someSMEs rely on investment to generate demand or their

    products and services. Like employment, allinginvestment can contribute to a downward spiral.Because o this risk, it is encouraging to note the EIUs

    nding that many SMEs are determined to resumeinvestment as soon as their respective economiesbegin to recover.

    Another problem with postponing investment is that,without it, the employment and revenue orecastsanticipated by SMEs do not add up. The EIU ndings

    urther suggest that the prospect o strong revenuegrowth did not materially a ect the probability o SMEspostponing investment. Although in past years somebusinesses may have developed business modelspredicated on easy credit, the act remains that most o the nance sought by SMEs in the recovery will be usedto support growth. This is illustrated by recent ndings

    rom CPA Australias Asia-Paci c Small Business Survey,which ound that nancing business growth was theleading reason or seeking nance among SMEs in therapidly recovering economies o Hong Kong, Singaporeand Malaysia.20

    19 ACCA Global Economic Conditions Survey Survey Report Q3 2009 August 200920 The CPA Australia Asia-Paci c Small Business Survey 2009 CPA Australia 2009

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    SMEs expect conditions to improveby 2011.

    The EIU studys ndings on the recovery o nancesupply are not very encouraging but they are hardlysurprising. A recovery in 2011 is consistent with otherinternational research.21 These ndings rein orce theneed or governments to remain vigilant and avoidcomplacency until 2011, the global economicrecovery will most likely remain ragile.

    O course, there is substantial variation in the outlook or nance between regions, owing to the di erent

    characteristics o nancial systems and varying econom icconditions on the ground. In the Asia-Paci c region andLatin America, nance is expected to start owing againat 2007 levels much sooner than elsewhere, urtheraccelerating economic recovery in those regions. Past2012, a relative abundance o liquidity in these regionscompared to North America and Europe could perpetuate the global imbalances that preceded the credit crunch,

    urther strengthening the capital ows rom net saversto net borrowers.

    Even within the regions acing a protracted creditcrunch, there is substantial variation. 14% to 26% o theNorth American SMEs surveyed by the EIU expectedthe availability o di erent types o nance to all urther

    over the next two years. By contrast, CGA-Canada and

    Synovate ound in their 2009 Survey that only 9% to18% o Canadian SMEs expected the availability o

    nance to tighten over the next 12 months, dependingon the speci c type o nancing.22

    Other research, however, corroborates the EIUs broadregional ndings. CPA Australias Asia-Paci c SmallBusiness Survey 2009 ound that 41% o small businesses in Australia anticipated some di culties in obtainingadditional nance over the next 12 months. This share

    ell to 39% in Singapore, 28% in Malaysia and 24% inHong Kong.23

    It is, however, also worth noting the large number o SMEs that either dont expect the supply o credit toever rebound or dont know when the recovery willcome. These SMEs, a ull 29% o the EIU sample24, may have put investment on hold and many will bereconsidering their business plans altogether. But whilethe latter is, on balance, a positive trend, the ormer isa dangerous one. As we discussed in the previoussection, investment is an important component o demand and depressed levels o investment, whetherdue to credit rationing or uncertainty about the uture,could very well sap the strength o the recovery. The SME views discussed above are driven largely bytrends in bank lending. However, even as the sector

    adjusts to lower levels o debt nance, it could miss

    21 For example, ACCAs Global Economic Conditions Survey has consistently anticipated a stable global economic recovery around late 2010.22 The CGA-Canada Small Business Survey 2009 Synovate, September 200923 The CPA Australia Asia-Paci c Small Business Survey 2009 CPA Australia September 200924 This percentage rises to 43% in North America, driven principally by the US sample.

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    out on a substantial opportunity. The supply o equitynance, whether rom individual investors, institutions

    or riends and amily, is expected to grow at a slowerrate than bank lending a negative development i thesector is to rebalance its nances while still achievinghigh rates o growth.

    Some frms are poised or a newgrowth phase.

    The EIUs ndings suggest that many SMEs are readyto grow as soon as there are credible signs o a stablerecovery. This is extremely welcome news, althoughas we have already discussed, there is always thepossibility that a shortage o SME nance and a lac k o investment by SMEs could jeopardise these growthprospects. But there are more constraints to SME growthbesides capacity, and it is worth noting their e ecton economic recovery.

    Growing SMEs have di erent needs and ace di erentchallenges than less dynamic ones. While rms withlow growth expectations (in turnover terms) arerelatively more concerned about the macro-economicenvironment, growing SMEs are substantially more likelyto be concerned with skills gaps in the labour market,competition and the burdens o regulation. Since the

    downturn began, government policy in many countrieshas shi ted away rom regulatory re orm and towardsmore regulation, while skills policy has re- ocused onpre-empting or reducing unemployment.

    With the recovery hinging to a large extent on theper ormance o these dynamic SMEs, governmentsneed to cra t policies care ully, to ensure that they donot impose undue constraints on growing businesses. The regulatory re orm and simpli cation agenda is asrelevant now as it was in early 2007, o ering even themost cash-strapped governments a tool or supportingSMEs. The skills agenda needs to respond to signs o real stability in the labour market, and shi t its ocustowards the goal o competitive advantage as soon assuch signs emerge.

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    About ACCA

    ACCA (the Association o Chartered Certi edAccountants) is the global body or pro essionalaccountants. We aim to o er business-relevant, rst-choice quali cations to people o application, abilityand ambition around the world who seek a rewardingcareer in accountancy, nance and management.

    We support our 131,500 members and 362,000 studentsthroughout their careers, providing services througha network o 82 o ces and active centres. Our globalin rastructure means that exams and support are delivered and reputation and in uence developed at a local level, directly bene ting stakeholders whereverthey are based, or plan to move to, in pursuit o newcareer opportunities. Our ocus is on pro essional values,ethics, and governance, and we deliver value-addedservices through 57 global accountancy partnerships,working closely with multinational and small entitiesto promote global standards and support.

    We use our expertise and experience to work withgovernments, donor agencies and pro essional bodiessuch as the International Federation o Accountants(IFAC) to develop the global accountancy pro essionand to advance the public interest.

    ACCA understands the real issues acing small businesse sas 63,000 o our members work in SMEs or smallpartnerships worldwide. ACCAs theme or 2009-2010 is

    Accountants or Business. This theme emphasises theimportant roles accountants play in both the privateand public sectors, promoting their role as advocateso sound business practices, champions o sustainablebusiness development and identi ers o value driverswhich lead to high-per orming organisations.

    About CGA-Canada Founded in 1908, the Certi ed General AccountantsAssociation o Canada is a sel -regulating, pro essionalassociation o 73,000 students and Certi ed GeneralAccountants CGAs.

    CGAs work throughout the world in industry, commerce,nance, government, public practice and other areas

    where accounting and nancial management isrequired. CGA clients range rom major corporationsand industries to entrepreneurs. Their expertise isvalued in the public sector, government and thecorporate world.

    CGA-Canada represents CGAs and students in Canada,as well as Bermuda, the nations o the Caribbean, thePeoples Republic o China and Hong Kong. CGA-Canadsets educational standards, pro essional guidelines,provides services and develops the CGA Program o

    Pro essional Studies.

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    CGA-Canada contributes to national and internationalaccounting standard setting through co-operativepro essional relationships with other accounting bodies,represents the interests o the public and CGAs, andserves as an advocate or accounting pro essionalexcellence.

    About CPA Australia

    CPA Australia is one o the worlds largest accountingbodies with a membership o more than 122,000

    nance, accounting and business pro essionals acrossthe globe.

    Our international presence continues to grow in termso representation on international bodies and in uencein the pro ession globally.

    In areas o nancial reporting, taxation and corporategovernance we are thought leaders in Australia andinternationally.

    Education, training, technical support and advocacyare our core services or members. Sta and memberswork together with local and international bodies torepresent the views and concerns o the pro ession to

    ederal, state and territory governments and to regulator s,

    industry, academia and the general public.