Launch of Access to Finance report
Global SME survey shows cautious optimism but government has a role, say accounting bodies
Governments everywhere must make the interests of small and medium sized businesses a key priority or put sustained economic recovery at risk, three of the world's leading accounting bodies have warned following a global survey which they commissioned.
CPA Australia, the Certified General Accountants Association of Canada (CGA-Canada) and ACCA (the Association of Chartered Certified Accountants), which together represent more than 700,000 accountants and trainees worldwide, sponsored research by the world-renowned Economist Intelligence Unit, which explored the problems facing small and medium-sized enterprises (SMEs) in accessing finance from banks and other lenders. Based on that research and other recent studies, the three bodies have created their own report, which includes a series of recommendations for governments, banks and business.
In those countries hit hardest by the economic downturn, banks have cut lending, and are facing criticism for not passing on interest rate cuts designed to help economies recover. Businesses experiencing depressed demand for their products or services are faced with tough decisions on investment and staffing levels and on the best structure to survive and compete in the future.
The accounting bodies have called for continued support for SMEs, noting that unless this sector has the confidence to resume hiring and investing, the global recovery could prove fragile. Early signs of improvement in the economy could be misleading and policymakers must remain on the alert until at least 2011, the three organizations have warned.
They also caution against overly interventionist or protectionist measures. Instead they call for a continued focus on encouraging growth in the SME sector through lighter regulation, supportive policies, selected fiscal incentives and reasonable labour market flexibility.
They call on governments to use tax incentives and workforce skills development to encourage investment and innovation. They also believe policy-makers and lenders should reduce credit uncertainty by publishing comprehensive information on business lending trends and lender requirements for business loans.
Banks too must be less formulaic in their lending approach, instead assessing risk on an individual basis with their SME clients. Accountants must also be prepared to mediate between lenders and borrowers, say the three bodies.
The decision to work together by ACCA, CGA-Canada and CPA Australia reflects the importance of the challenges facing SMEs today. The three bodies believe they can motivate policy makers, businesses and other stakeholders, to highlight the importance of SMEs and their contributions to global economic development.
"Given this is the first recession for many SMEs, they may need to re-learn finance and reconsider how they do business. Many will need support from professional accountants who have a crucial role to play in helping them to get through these challenging times," said Helen Brand, Chief Executive of ACCA.
"Companies must plan for the recovery but must also include a worst-case scenario in their plans should the recovery stall," said CPA Australia Chief Executive Alex Malley. "They should also expect any global recovery to be a slow-moving beast. For those that are in a strong financial position however, there will be opportunities for expansion and growth."
"As the world emerges from our recent economic difficulties, it is critical to focus on the circumstances and requirements of the small and medium sized business sector," said Anthony Ariganello, President and Chief Executive Officer of CGA-Canada. "Our long term economic recovery and global business strength depend upon the vibrancy of this sector."
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