Small and medium enterprises (SMEs) need to look beyond their own balance sheets if they are to survive in an increasingly difficult market, an industry analyst said this week.
Shannon Smith, partner at Mazars Durban (South Africa), said SMEs needed to access and analyse increasingly complex information about their businesses in order to remain competitive in the market.
“The days of only looking at one’s business in terms of profit, loss and balance sheets are gone,” Smith charged.
“Today’s SMEs are operating in an increasingly harsh environment and wider sets of data, including purchases by suppliers, property related costs, top operating expenses and sales by specific debtors,” Smith said, adding that these factors were increasingly becoming part of their success or failure.
Smith also said SMEs were in need of skills to present the data that they gather in a format that makes it useful and relevant to them.”
SMEs need to rely on outsourced advisory services to enable them to make the best possible strategic decisions, she said, explaining that while bookkeepers were able to give the business owner information about the company’s balance sheet, they won’t necessarily have the skills or knowledge to enable the business owner to take the business to the next level.
Outsourcing that function to a specialist business advisory firm simply made good business sense, Smith advised.
“The business environment is much more dynamic today, and a company needs to be able to see how its circumstances are changing.
“This means that relevant information should be available in real time, as opposed to every quarter or six months. It is also important for a company to be able to measure its data against a benchmark.”
One example, according to Smith, is the ability to analyse operating costs.
“Knowing what your top operating costs are, whether they have changed over time and what the reasons are, can help the business make the right strategic decisions long before expenditure gets out of hand.
“The same is true for many other types of data, and the ability to predict where one’s business is going, relies on having as much data as possible.”
Today’s SME owners are also expected to be more skilled at understanding relevant data, Smith said.
“Whether it is a small shop or a dynamic medium-sized business, owners no longer have the luxury of focusing only on operations or on their core skills.
“The company’s survival depends on the owner understanding everything that affects their business. This is once again where the outsourced business advisory plays a vital role.
“It is about presenting critical data in a format that speaks to the decision makers within the company.
“The advisory will compile management packs that offer the information in a variety of ways that include not only spreadsheets, but also charts and graphs with meaningful and objective insights.”
Finally, the advisory will be able to offer guidance based on the available data. “With the right data analysis skills at their disposal, SMEs are in a much better position to be more competitive, grow faster and survive in tough economic times,” Smith concluded.