Small and medium-sized enterprises (SMEs) are crucial to the global economy. The World Trade Organization reports that more than 90% of companies globally are micro, small, or medium-sized, contributing to nearly two-thirds of total employment worldwide. In acknowledgment of their significant impact, the United Nations has designated June 27th as Micro, Small, and Medium-sized Enterprises Day to highlight their essential role in driving sustainable development.
However, the challenges for SMEs are growing. Research by the Small Business Administration in the United States found that only one-third of SMEs survive beyond the 10-year mark, even before the COVID-19 pandemic. And in the wake of the pandemic, SMEs face even more hurdles, including inflation, rising interest rates, energy security concerns, and supply chain disruptions.
One of the main reasons many SMEs fail is a lack of financial knowledge. But there are steps SMEs can take to improve their resilience, and financial literacy is key to navigating uncertainty. This is where financial advisors and accounting firms can make a real difference. When SMEs lack key performance metrics, making informed business decisions becomes difficult.
Here’s how financial professionals can help boost financial literacy and support SMEs’ success:
Financial advisors are the go-to experts for SMEs. Research shows that SMEs receiving advice from these professionals experience better growth, increased profitability, and higher survival rates. They can help SMEs make better decisions and build stronger, more successful businesses.
Financial advisors play a critical role in enhancing SMEs’ financial literacy by helping them understand and interpret their financial accounts. This support allows business owners to make informed decisions about the future of their operations. Financial experts can also introduce modern financial practices like forecasting, which is vital during uncertain times. Training and tailored financial reporting can also empower SMEs to take control of their finances.
In today’s economic climate, managing cash flow and debt is more important than ever. Financial advisors can help SMEs implement strong credit control systems, assess the creditworthiness of partners, and develop effective debt management strategies. They can also advise on managing working capital and inventory, ensuring that SMEs don’t overstock or miss opportunities to conserve cash.