It may be small but SME owners must keep their house in order

January 2011

By Steven Cohen

Without fail, SMEs around the globe have one common plea to their respective governments; they want real resolutions to ease the administrative and financial burden they face.

But in my experience, small business owners and managers often overlook the important day-to-day administrative requirements. Monthly book keeping and accounting obligations of small business often lag, resulting in a last minute dash when deadlines loom. No wonder SME’s refer to their administration as a burden.

Sure, I understand that turning a profit is essential and that, in a world where time is money, administration ranks very low on the list of priorities. But I ask myself, isn’t it easier to take one day a month to send your invoices, pay your creditors, do a bank recon and close that month’s books than sit with a confusing pile of paper once a year?

Particularly when any mistakes made in wrapping up the financial year can come at a cost; whether as taxes, penalties or even a tarnished reputation.

What surprises me about this sluggish approach to accounts management is the fact that record keeping allows both business owners and managers to stay informed on the current state of their business.

In today’s competitive knowledge-based economy, a detailed understanding of one’s accounts can provide valuable information to support the decision making process.

The ability to analyse the state of a business and understand its strengths and challenges can provide that much needed competitive edge – the elusive position SME’s bemoan they can never achieve due to the current economic and fiscal environment.

In a confidence survey conducted amongst small businesses in South Africa last year, 80 per cent of respondents felt that they were not being offered enough support from traditional banks, both in terms of starts up capital or general financing. I don’t think that the situation is that much different in Kenya.

At the risk of being crude, I would suggest that it would be much easier to get that loan if the business owner could present a clean set of a hat; being able to do so also demonstrates entrepreneurial competence.

Please don’t get me wrong, I am not saying that all SME’s are administration offenders or that bad bookkeeping hinders growth – all big businesses started small.

But I am saying that SME’s cannot rely solely on government to lessen the administrative burden.

That responsibility starts within the business and the relevant people must ensure that their house is kept in order no matter how small it may be.

Mr Cohen is managing director, Softline Pastel