Page 39 - The Pakistan Accountant Oct-Dec 2018

Why do SMEs prefer Key challenges faced by Keeping up-to-date SMPs? SMPs globally The main customers for the SMPs In today’s competitive environment, with the ever-increasing are the SMEs which look up to them the challenges faced by the SMPs regulations, laws, not only as the most suitable and at regional and global scale are preferred service provider but also manifold. As per the International international and local as trusted business advisors who will Federation of Accountants (IFAC) cater exactly to their specific business Global SMP survey, more than two- standards and complying needs and requirements. Why do SMEs thirds of the firms are undergoing choose SMPs? SMEs are usually small the challenge of attracting new with other day-to-day and proprietary businesses which clients and retaining the existing are not equipped with competent ones. Also, keeping up-to-date with updates is a big challenge professionals and adequate resources. the ever-increasing regulations, laws, Due to the lack of financial skills, they international and local standards for SMPs where there need to outsource and rely on outside and complying with other day-to- accountancy specialists to assist them day updates is a big challenge for is a dearth of qualified in their day-to-day functioning and SMPs where there is a dearth of execution of technical financial tasks. qualified staff and limited training staff and limited training So, SMPs not only provide the regular facilities available in-house. Also, the audit to the SMEs but also accounting pressure of charging lower fees from facilities available services, tax services, advisory and SME client is another concern. Due management consultancy and other to a huge number of SMPs, there is in-house. non-assurance/related services. a hard competition amongst them and the clients targeted by them are In today’s world, the main revenue of also SMEs which are unable to afford SMPs arises from providing advisory paying higher fees and one of their and consultancy and other non- reasons for choosing SMPs is the assurance engagements rather than attraction of paying smaller amount the conventional audit. Advisory of fee. Many times, SMPs are unable and consultation services includes a to get fee increase and the same wide range of services, like corporate amount of fee is charged for years, advisory, strategic business planning therefore, maintaining or increasing and development, restructuring, revenue becomes a real hurdle. Faced insolvency and business recovery, by market, regulatory and other forensic accounting, corporate operational challenges themselves, reporting, etc. Such are the services these SMEs are under financial burden that the SME owners expects to receive most of the times, and are unable when they hire a professional firm to pay for the services acquired of accountants in order to compete from SMPs on timely basis. This, in successfully in the complex market. turn, makes the SMPs incapable of And from here, a strong and trusted maintaining adequate cash flows to relationship is initiated between the meet their regular business needs. company and the firm. Not only employing qualified and However, there are a few threats experienced staff is a challenge but that is accompanied in this kind of retaining them is a problem beyond relationship such as: control. A qualified professional ▪ Familiarity threat: The auditor accountant is looking for better becomes too intimate with the client growth prospects in terms of attractive and doing audit at the same time salaries and perks coupled with while providing advisory services, good client exposure and learning this might create conflicts of interest opportunities. When SMPs are unable between the two roles. Long to fulfill the required demands of association with one client might these professionals, they end up hiring bring a question of professional the left-over chunk of the market. independence threat and ethical By any chance, even, if they are issues. able to hire the right professional, it The SMPs are under great ▪ Financial dependency threat: becomes very difficult to retain one When providing multiple services to in the absence of explicit succession pressure to find the best a single client makes the SMP rely planning. on major income from that source technology that is most only and in case of losing the client Apart from these major concerns, creates financial dependency threat. there are many other challenges suitable to their practice. October - December 2018 The Pakistan Accountant 37