While the more traditional approach to enterprise development (ED) typically involves providing entrepreneurs with high-level support and mentorship, the importance of assisting them to focus on “the basics” cannot be underestimated. This includes identifying and addressing gaps in their administration, compliance and general reporting systems, says Shawn Theunissen, head of CSR at Growthpoint Properties and Property Point (Growthpoint Properties’ enterprise development programme), in this month’s SmartProcurement.
As various national and international studies continue to highlight the barriers SMEs face in terms of accessing the formal economy, one of the issues often overlooked is a lack of administrative capability within the company. “This is sometimes further compounded by poor levels of compliance relating to tax and reporting requirements,” says Theunissen.
“With many SMEs failing to recognise the business implications of this oversight, ED initiatives and programmes can – and should – play a key role in alerting entrepreneurs to it, and assist them to address these issues where appropriate.” This is because everything from poor filing systems to incomplete contracts, policies and procedures can potentially cause a business to trip up at a critical time, with the real consequences being felt when they can least afford it.
Theunissen notes that most entrepreneurs drive operations and are essentially ‘client-facing’ in terms of their roles in their businesses: “Our experience has shown that administration duties are consequently deferred in many instances to when they ‘have time’.”
As a result, business owners often lose touch with what is actually going on at a very basic level, for example, where projects are with less pro-active clients, which invoices haven’t been paid, and whether their tax clearance certificate is still valid. This can (and does usually) have direct implications for the SME – delaying payments because invoices and statements cannot be produced when requested, or causing them to miss tender or proposal deadlines due to supporting documentation not being available.
Questions about the SME’s professionalism and ability to deliver can subsequently be raised because of this, especially when it fails to deliver on what are ‘basic’ or standard corporate expectations. This can affect the entrepreneur’s reputation negatively – with clients unwilling to give them opportunities on bigger projects or, as a worst case scenario, reducing the value of their projects in the long term.
“Because we are so aware of the material impact of this oversight, Property Point’s programme managers perform a monthly health-check with each of the businesses on our programme. This includes everything from a basic cashflow analysis to a review of reporting on projects and spot compliance checks,” says Theunissen.
Should any issues be red-flagged in this process, programme managers then work to determine the root cause and make a recommendation towards addressing this. “Often it’s a case of demonstrating how the entrepreneur can work smarter as opposed to harder to build capacity within their team. We also encourage them at a very practical level to resolve the immediate issue at hand.”
As the revised B-BBEE codes put corporates under more pressure to do business with SMEs, ED programmes need to assist entrepreneurs to gear themselves and their operations accordingly, and to work to ensure they are able to meet the most basic expectations of “big business”. “This practical approach will go a long way to reduce risk within the SME and help the entrepreneur to appreciate and focus on ‘the basics’ within their business,” concludes Theunissen.