Avoiding five fatal business flaws

In welcoming the US$800,000 grant from the US Multilateral Investment Fund (MIF) to train 900 owners or managers of small and medium sized enterprises in Jamaica, to help them to succeed in the international market, ACCA (the Association of Chartered Certified Accountants) has advised that it is vital that business owners start taking action now to avoid the pitfalls which have caused many a small firm failure. Awareness of the “five fatal flaws” will help to prevent businesses from reaching crisis stage.

Smaller firms, whilst more agile than larger ones, also face more challenges. Many small businesses fail to plan ahead or to conduct regular reviews of their strategies. As a result, they are more vulnerable to threats from the competition and changes in the marketplace. Taking note of the issues outlined in the “five fatal flaws” need not be time intensive, nor costly, and could mean the difference between survival and failure.

The “five fatal flaws” are set out below.
* Many firms fail to keep a close eye on potential opportunities and threats. They should constantly monitor local developments, such as newly opened businesses and closures, and the effect that these changes might have on their customers and suppliers.
* A number of firms do not have formal credit management processes to ensure that their customers pay on time. Delayed payments can reduce cash flow and leave firms unable to pay their own debts to suppliers.
Unsurprisingly, this can damage their relationships with suppliers and harm their reputations. To combat the problem, businesses should set up simple but robust processes, such as the production of monthly debt reports followed up by the monitoring of outstanding payments.
* Businesses which rely solely on one or two lucrative customer contracts are left in vulnerable positions if those customers stop buying. Firms should thus expand their customer bases and for similar reasons broaden their supplier bases.
 * Neglecting customer needs loses contracts. Employees at every level of the organisation irrespective of size, from receptionists to managers, should be made aware of the importance of recognising the needs of customers and delivering value to them. This will ensure that customers remain loyal and can help to identify new sales opportunities.
 * Many small firms spend insufficient time talking issues through with their advisers, including accountants and bank managers, and only go to them when matters reach crisis point and are much more difficult, if not impossible, to resolve. Accountants, for example, can give support and advice at all stages of business planning and on a range of issues, including access to finance, business expansion and regulatory matters.
The bottom line: the message is clear —being complacent is not an option in today’s economic climate, so all firms, particularly the smaller ones, must be on the cutting edge of performance, technology and management and accounting skills.

The Association of Chartered Certified Accountants (ACCA) is the largest professional accountancy body operating on an international basis, with almost 300,000 members and students in 160 countries.  www.accaglobal.com or email emile.valere@accaglobal.com