Sunday, 2 November 2014

SME Accountants Nowadays

In SME companies nowadays, the employers expect an accountant not only to cater all related accounting roles but also to look for financing, investment and new business ventures and opportunities. Accountants also need to understand about the operation, business developments and able to understand the technical terms used and able to predict market viability of new products. 

The daily accounting roles need to be entrusted to the executives, the accountants need to  review the reports and internal controls of the company periodically whether every 3 days, weekly or monthly. It depends, more critical the function it means the accountant is required to review it more frequent unless the executive or subordinate is capable enough to handle the function. 

There are several methods, tools, or theories can be used in assisting our function in business developments including SWOT Analysis, Ansoff Matrix and BCG Matrix.   

SWOT Analysis 

SWOT analysis can be used to evaluate position of an organization or company by its strength, weaknesses, threats and opportunities. Basically the strength and weakness come from inside of the organization while opportunities and threats are from the external factors. 

By keep informed about the situations of the organization, they will be able to convert the weaknesses and the threats to their strength and opportunities. As an example, if an organization knows they have weaknesses in technical and sales, they will try to improve their performances by hiring better personnel or train their staff to enhance their skills. 

Ansoff Growth Matrix 

Another tool that can be used to implement strategies for companies to react to the market direction is Ansoff Growth Matrix.

In this matrix, a company can decide whether to penetrate, develop new product, develop new market or to completely diversify their business.   

Market Penetration usually used in order to penetrate a highly competitive market or to gain market share. Example of the penetration strategies are by highly intensive marketing action or producing a variety of products packaging.

Introducing new products is a way for a company to create multiple cash flows or revenue streams instead of depends to the current products. More products means more probability to create more revenues which later will turn to bigger margins and profits for a company.

Solar Car From Ford
Venturing to a new market is one of the ways that a company can take when the demand and supply in the current market is too tight or there are extras in the current production capacities. By achieving the maximum production capacity, a company might be able to achieve economies of scale which will reduce cost per unit of the product. Cheaper the product, better the competitiveness in the market. Plus with a good quality.  

Diversification is where a company take a strategy to produce a new product and venture to a new market simultaneously. This is the riskiest strategy among other 3 strategies but it will create synergy with the existing position of the company. As an example, for a renewable energy company which focus on Solar PV industry might find it is interesting to start an automotive assemble and production line as part of the business diversification strategy. Later the company might be able to offer the market the most efficient solar car as a result of experience and synergy between automotive and solar industries.

BCG Matrix 

Other tool that an organization can use to make a business decision is BCG Matrix.  A matrix which has 4 quadrants, Question marks, Stars, Dogs and Cash Cows. This tool assist the decision maker to decide whether to invest, to divest, to keep or to eliminate the current products offered.

The Stars quadrant is where the organization/company market share and the market growth are high. It has the potential to create a large stream of revenues and customers, the decision is whether to invest or keep the market share high for the company.

The Cash Cows quadrant is where the market is getting matured but the company has high shares. In this quadrant, the company might enjoy a stable revenue like what is symbolized as Cash Cows but need to be remembered, later the Cow will become old and die. Therefore in this situation, the company might want to keep or maintain the Cow as long as it can before a new Cow can be produced.    
The Question Marks quadrant is a quadrant for new products, where at the stage of developing new products, the directions and demands of the market towards the products are usually unknown and questionable. Therefore at this stage/quadrant, it is advisable for the company/businesses to study and invest in term of making it feasible in a long run, profitable and turn it to a star.   

Question marks usually will turn up as Stars or Dogs. The Dogs Quadrant is the quadrant that many businesses try to avoid due to low market share and growth but is acceptable in certain scenarios like where it is complimentary in order to support the Stars or the Cash Cows.  


The models are easy to understand but we need to bare in mind that sometimes the business decisions are more complex that what the models can solved. It depends to our discretion, experience and good business judgements to decide what are the best approach for our organizations. If a decision is right and workable at an organization, it is not necessarily right for other organizations. Accountants need to know how to recommend a good business decisions because they are the co-pilot of their organization.  

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