Fazmina Imamudeen examines the role of SMPs in uplifting the SME sector

Without discernible distinction between wealthy and developing nations, COVID-19 has all but destroyed small and medium-size enterprises (SMEs) worldwide. To add insult to injury, SMEs in Sri Lanka have been hit very badly by the most serious economic crisis the nation has seen. And it is heaping more and more weight on a sector that is already struggling.

The imposition of lockdowns, travel bans and airline suspensions during the pandemic, along with protracted power cuts, fuel shortages, the rupee depreciation and the ban on certain raw materials have made navigating the economic crisis extremely difficult.

And this situation has also out the long-term viability of SMEs at risk.

In Sri Lanka, small and medium-size enterprises contribute substantially to the country’s social and economic growth. These enterprises are responsible for as much as 52 percent of GDP. And nearly 60 percent of the country’s workforce – or four million people – is employed by SMEs.

So the elephant in the room must be addressed before it causes irreparable harm to the national economy.

It is essential that this vital sector, which forms the backbone of the national economy, receives the assistance that it urgently needs so that it can continue to function at full strength.

SMEs need to have competencies in order to survive in an environment that is constantly changing, and sourcing resources in the form of advice and support is the most common strategy for ensuring their continued existence and growth.

Small and medium-size practitioners (SMPs) are able to play the role of crucial business consultants since SMEs are struggling with a lack of resources in an environment that is extremely volatile.

Providing services to the majority of SMEs and even some listed companies, SMPs play an important role in the accountancy and auditing profession. A large share of an SMPs income comes from providing typical statutory compliance services like auditing, and filing tax returns for small and medium-size businesses.

Many people think that most SMEs work with similar size accountancy firms. Due to the fact that small and medium-size enterprises need to provide documentation to comply with government rules such as preparing audited financial statements, the interaction between SMEs and SMPs is seen as essential.

Studies have shown that a compliance-based SME-SMP engagement may also lead to sharing noncompliance-related advice and support.

The need for specialised guidance to gain an edge in a challenging market has led to the development of advisory and consultancy services for SME owners.

Many audit clients of SMPs seek this guidance and much of it has its roots in more conventional service models. This is to be expected, given that auditors are specialists trained to render external services with the perspective of an unbiased third party.

Synergies between SMPs and SMEs may be strengthened through a variety of activities, and small and medium-size practitioners may receive support as they go through the necessary transformations to become trusted advisors to SMEs.

In order to boost the visibility and recognition of SMPs, and better represent their interests, the government can establish SMP-SME advisory groups in addition to working committees. This will help small and medium-size enterprises use their greatest resources while simultaneously expanding their reach to international markets.

Furthermore, SMPs will learn how to lead their SME clients toward the most advantageous service options; and from there, to form fruitful partnerships with service providers and networks that can best meet their needs.

On the other hand, extensive research needs to be conducted before one can know and understand the functions of SMPs.

SMPs should be able to shift their focus to areas where they may be of assistance to clients. When faced with an economic crisis of this magnitude, it is understood that ‘business as usual’ is no longer possible because SMEs are at risk of collapse.

Owners of SMEs are already struggling to pay their bills and facing cash flow problems. SMPs can be of assistance to such businesses and help them manage risks of this nature.

If SMPs, SMEs and the government work diligently and persistently together, the support structure of the economy can be preserved.