ACCA talked to SMEs from across the globe to create a guide for CFOs of fast-growing small businesses.
A new report from ACCA has collated evidence from across the world of the key role the finance function performs in fast-growing SMEs, extending far beyond its traditionally perceived auxiliary role to one of a strategic business partner that drives growth as well as enabling it.
Rosana Mirkovic, head of SME policy at ACCA and author of the report, spoke to a range of SMEs worldwide that had experienced over 70% growth during a period of three consecutive years. Commenting on the findings Mirkovic said: ‘Growth of this rapidity is almost always driven by one of three factors. Strategic internal decisions to enter new markets, acquiring technical expertise that enabled the development of new products or as a response to external stimuli such as consumer demand.
‘Taking advantage of the opportunities for expansion brought about by these factors almost always entails certain risks for an SME. For example, the rapid nature associated with this type of growth can lead to issues such as insufficient staff capacity, increased business ‘traffic’ such as simultaneous deals or entering new, very competitive or politically unstable markets.’
According to Mirkovic, the finance function plays an integral part in ensuring the business takes full advantage of these opportunities for growth, without compromising the future of the organisation: ‘CFOs have a responsibility to ensure financial health and discipline so that the company can continue growing in a sustainable fashion in the future. Being forced to adopt a more reactive approach operationally, often at high speed, means that processes are often not as smooth as they might have been previously and this task can often become extremely taxing.
‘To combat this change in environment, the finance function must become integrated across the key business development departments in order to prepare carefully for, and plan, new growth. SMEs experiencing fast growth require a CFO willing and able to take a key role in monitoring and controlling high growth as it unfolds, as well as forecasting future trends and possible new directions for the business.’
By holding these key responsibilities, the finance function extends well beyond the traditional accountancy and processing role, becoming a central rather than auxiliary presence, says Mirkovic. ‘CFOs are undoubtedly an essential element in the strategic decision-making of any high-growth business. For SMEs, however, their importance to not only exploiting periods of accelerated growth, but also protecting the business from the stresses and strains associated with it, cannot be overstated.’