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Our Scottish Pacific SME Growth Index is a twice-yearly snapshot of Australia's small to medium sized business sectors showing cashflow issues that many businesses face today, below is one of six key insights found in our September 2019 report:

SMEs are seeking more regular guidance from trusted advisors – but are they putting their faith in the right advisors?

SPC11500 SME Growth Index Social Visuals AW4

Business colleagues and suppliers top the most trusted business advisors list.

However, it’s worth noting that SMEs are more likely to nominate family and friends than a professional such as their accountant or broker.

Running a business can be tough and lonely, so it’s important for SME owners to get good advice, given that an estimated two-thirds of small businesses fold within three years of launching.

So it is a positive sign that SMEs are reporting more regular contact with their trusted advisors (only 15.6% of SMEs turn to advisors irregularly, down from 29.2% in 2017).

One in four SMEs (24%) contact their most trusted advisor every week or fortnight, a fourfold increase from 6.3% in 2017. The proportion of SMEs who contact them monthly (47.5%) or once a year (12.9%) remains steady.

 

Who do SMEs trust?

Getting more regular advice should be a good thing, but that could depend on the quality of the advice.

Consistent with 2017 results, SMEs’ most trusted advisors remain business colleagues (40.7%) and trading partners / suppliers (22.2%).

Advisors with specific expertise, including accountants (5.7%) and brokers (4.1%), rank behind friends (8.6%) and family members (7%) as the go-to source for business advice. Fewer than one in 100 SME owners (0.9%) say they use a personal business coach.

The most striking positive change is the massive decrease in SMEs nominating that they have no trusted advisor, falling from 38.6% in early 2015 to only 8% today.

 

Worrying news for accountants

There is a red flag around the fact that the percentage of business owners nominating their accountant as their most trusted advisor has almost halved. This has fallen to 5.7%, from almost 10% when the Index covered this topic in 2017 and 2015.

One possible explanation is the SME sector’s increasing reliance on online accounting software. SMEs may be taking control of the “number crunching” side of their business, but potentially at the expense of receiving the expert advice and guidance that accountants can offer.

Amidst predictions about the impact automation and offshoring will have on accounting jobs in Australia, the major accounting bodies have encouraged their members to provide a broad range of advisory services that will “future-proof” them from job losses.

Given the qualified and broad advice accountants can provide businesses, well beyond “number crunching” tax services, the results of this round of the Index suggest there is much work to be done in cementing the accountant’s role as an essential SME advisor.

For the overall success of the SME sector, there needs to be an attitude shift towards seeing accountants as a business investment rather than a cost point.

This sentiment is reinforced by ASBFEO’s Kate Carnell, who states that while many accountants and bookkeepers do offer services and advice beyond lodging tax returns and submitting BAS, they need to be more proactive in their engagement with small business clients to discuss getting “finance fit” and what funding options are available.

Neil Slonim of theBankDoctor, whose non-profit website helps small business owners navigate the myriad of funding options now available, says one explanation for accountants’ fall in rankings could be “doctor Google”.

Slonim says younger business owners, rather than seek a local accountant who could help them, have a tendency to rely on peers or go straight to an internet search and come across resources offered by governments, ASBFEO and his own site.

When it comes to brokers, it might also pay for broker associations to look at these SME Growth Index results and see where their opportunities lie if they want to move higher up the “trusted advisor” ranks in assisting small business owners.

Like to know more? To download the latest copy of our SME Growth Index, click here.

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