Stuart Dunlop, regional director at ACCA, the global body for professional accountants, examines when and how SMEs should change their accounting strategies
Many start ups and early stage companies are focused on one thing, and one thing only – cash flow.
Of course, this is absolutely right in order to ensure that clients pay their bills on time in order to in turn pay suppliers so that lines of credit stay open, and the business can keep on trading.
The question then, I believe, is at what point in the evolution of a young business should it start to look at its finance function and grow the capacity beyond simple, yet important, book keeping?
Of course in a large multinational, it is expected that the Chief Financial Officer sits beside the Chief Executive and advises on a wide range of issues from investor relations to business strategy, but in a small company it is not always clear where the finance function, if one exists at all, sits within the organisation.
Often, this is due to a new enterprise being the embodiment of the vision, strategy and values of the founder, with not much room for additional opinion.
However, as a start-up becomes more mature, even if it is still medium sized, there is a real need to start evaluating the strategic role of the finance function within the organisation.
As this market continues to become more globalised, and domestic companies deal more regularly with international concerns, there are a number of issues that need to be taken into account. This not only includes foreign exchange fluctuations which can have a marked impact on the bottom line, but compliance with cross border legislation and regulations that not only govern accounting standards but best practices in accountability and transparency.
In fact, in a recent survey of UAE based CFOs, 96 per cent of respondents indicated that a strong grounding in business ethics was essential to their operation.
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