Albert Folorunsho

GROWING SMALL &

MEDIUM ENTERPRISES

Albert Folorunsho FCA, FCTI, ADIT.Pedabo Associates Limited

THE OPPORTUNITY FOR ACCOUNTING TECHNICANS

18th AATWA Annual Conference (Lagos, 2013)

Albert Folorunsho

INTRODUCTION

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• SMEs play an important role in a Nation’s economic development1

• SMEs are largest employers of labour in the economy2

• Nigeria needs to support the growth of SMEs as a tool for its overall economic development

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• Major impediments of the SME sector in Nigeria include: Infrastructural decay, Funding problems, Unhealthy competition by MNEs

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• The fortunes of SMEs need to be reversed if the millennium goals are to be achieve

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Albert Folorunsho

INTRODUCTION -Cont’d

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At the end of the presentation, participants will be more

acquainted with:

Global definitions of SMEs

The roles and significance of SMEs in an economy

Problems limiting the success of SMEs with particular reference to Nigeria.

The roles accountants play for the SMEs and the opportunities for Accounting

Technicians

Albert Folorunsho

SMEs Definition / Classification1

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SMEs Definition / Classification

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The UN and OECD have provided general criteria for SME definition;o Turnovero Asset baseo Number of employees

Japanese Ministry of Economy, Trade and Industries defines SMEs as follows:

Capital Employees• Retail & service sector ≤ USD 600,000 <50• Wholesale Sector < USD1.2 Million <100• Manufacturing Sector <USD3.6 Million <300

Albert Folorunsho

SMEs Definition / Classification - Cont’d

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Small Business Administration of USA defines SMEs as businesses that are: o Independently owned and operatedo Non-dominant and profit orientedo Classification based on number of employees and sales

volumeTurnover B/S

o < 50 employees ≤ €50 million ≤€43 million

Albert Folorunsho

SMEs Definition / Classification - Cont’d

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Ministry of Economic Affairs – Taiwan

IFC & Multilateral Investment Guarantee Agency (MIGA)o < 50 employeeso < $3million total annual sales

Paid in capital Sales Rev

Manufacturing, Construction, Mining, Quarrying

≤ USD42 million -

Agric, forestry, fisheries, water, elect, Gas etc

≤ USD3.03 million

Albert Folorunsho

Nigeria2

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Albert Folorunsho

SME Definition in Nigeria

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a. CBN under Small & Medium Enterprise Credit Guarantee Scheme(SMECGS)o Asset Base (excluding land) – between N5m & N500m.o Labour force - between 11 and 300 employees

b. National Council of industry (2001)- Employee ≤ 300- Asset base ≤ N200 million

c. National Policy on SMEs- Micro enterprises - ≤ 10 employee and <45 million asset

base- Small Enterprise between 10 – 49 employees and

between N5m & N50m asset base- Medium Enterprise: From 50 – 199 employees

Albert Folorunsho

Roles & Significance of SMEs

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The following have been said of SMEs:

• SMEs contributes 50% of GDP …..(OECD).

• 65% of employment in high income countries are from SMEs.

• SMEs generate 70% - 90% of employment in middle income countries.

• Significant impact on the export earnings in developing countries.

• SMEs enhances entrepreneurship innovation and invention

Albert Folorunsho

Roles & Significance of SMEs - Cont’d

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• SMEs drive technology change and growth in productivity

• Catalyst to private sector development

• According to IFC, 96% of business in Nigeria fall under SMEs

• 90% of manufacturing and industrial sector in numbers fall under

SMEs.

Albert Folorunsho

Problems Limiting the Success of SMEs in Nigeria

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• Deficient public infrastructure

• Bureaucratic bottlenecks & inefficiency in the administration of incentives

• Lack of easy access to funds

• Discrimination by banks, due to credit risk

• High cost of packaging appropriate business proposals

• Uneven competition and preference for imported products

• Dependence on imported raw materials – foreign exchange risks

• Low and dwindling consumer purchasing power resulting in low demand

for local products

• Dumping & importation of substandard products

Albert Folorunsho

Problems Limiting the Success of SMEs in Nigeria – Cont’d

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• Inadequate educational & technical background.

• Weakness in organization, marketing, personnel, accounting records

and information usage, processing & retrieval.

• Multiplicity of regulatory agencies & taxes, increasing high cost of

doing business.

• Absence of long term finance.

• Poor intellectual capital resources

• Lack of appropriate & adequate managerial & entrepreneur skills

• Inadequate training & leadership development

Albert Folorunsho

Agencies set up to support SMEs

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• Small & Medium enterprises credit Guarantee Scheme (SMECGS) of

CBN.

• Small & Medium Industries Equity Investment Scheme (SMIEIS) of

CBN.

• Family Economic Advancement Program (FEAP)

• Industrial Development and Coordinating Centre.

• National Directorate of Employment

• Nigerian Bank for Commerce & Industries (NBCI)

Albert Folorunsho

Agencies set up to support SMEs – Cont’d

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• Nigerian Industrial Development Bank (NIDB)

• National Economic Reconstruction Fund (NERFUND)

• The African Development Bank / Export Stimulation Loan (ADB/ESL)

• Nigerian Export Import Bank

• Microfinance Banks

• Bank of Industry (BOI)

• Small & Medium enterprises Development Agency of Nigeria

(SMEDAN).

Albert Folorunsho

Major Areas Identified for Development to boost SMEs

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• Institutional, Legal & Regulatory framework.

• Human Resource Development.

• Technology, Research & Development.

• Extension & Support Services

• Marketing

• Infrastructure

• Finance.

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Other Steps to boost SMEs Growth

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• Nigerian Investment Promotion Commission (NIPC).

• Nigerian Export Promotion Commission (NEPE)

• The Industrial Development Act.

• Nigerian Content Development Act.

• Private Sector participation in Power, Tourism, Manufacturing and

Export.

• Solid Mineral Mining etc.

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The Roles of the Accountant3

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The Roles of the Accountant

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• Accountability and Planning.

• Feasibility Report.

• Business Plan Preparation.

• Financial Modeling.

• Accounting Services & Book Keeping.

• Tax Management Services.

• IT Services.

• Audit & Assurance Services.

• Asset Verification & Certification.

Albert Folorunsho

Competence Areas for the Accounting Technicians

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• Budget Preparation

• Cashflow forecasting

• Basic Accounting functions Analysis of payables & receivables

Bank Reconciliation

Petty cash management functions

General Ledger entry.

• Tax Compliance functions

• Payroll management functions

• Preparation of management accounts.

• Basic internal control functions

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Opportunities for and place of the Accounting Technicians.

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• Employment opportunities

• As accounts officers in SMEs.

• Outsourcing materials for big/medium size firm.

• Direct contract services for SMEs.

• Assist SMEs to be complaint with IFRS effective from 2014.

• Ample opportunity to diversify from Accounting Profession to several

lines of business under the SMEs schemes.

Albert Folorunsho

Thank You4

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