Challenges in talent acquisition, cost management, and ESG reporting emerge as the three top hurdles for SMEs as we enter 2024
New research from ACCA (the Association of Chartered Certified Accountants) highlights the pressing challenges and strategic innovation opportunities for small and medium-sized enterprises (SMEs).
The study, SMEs: Business challenges and strategic innovation opportunities, reveals three main challenges: escalating costs, workforce and talent management, and the evolving ESG (Environmental, Social, and Governance) reporting agenda.
SMEs form the backbone of Sri Lanka’s economy, accounting for 75% of all businesses, contributing to 20% of exports, 45% of employment, and generating over half of the Gross Domestic Product (52%).
ACCA Head of South Asia, Nilusha Ranasinghe says, “These businesses have long been a source of aspiration for many Sri Lankans. However, they now face daunting challenges and are among the least prepared for a future filled with uncertainties.
“Recent back-to-back crises have left numerous SMEs in Sri Lanka fighting for their existence, with many having to close their doors permanently. Our findings are a clarion call for SMEs to embrace strategic innovation. By addressing these challenges head-on, SMEs can unlock new growth avenues and strengthen their market position,” she adds.
The report emphasises the need for tailored strategies that can help SMEs navigate the evolving business landscape successfully, including embracing innovation, optimising resource management, and staying ahead of regulatory changes.
Key findings include:
Cost pressures and the economy: SMEs face significant increases in utility prices and supplies, with 58% of businesses highlighting higher costs as their top concern. A quarter of respondents said utility prices had surged by over 20%. This significant challenge underscores the need for effective cost management and innovative financial strategies.
Workforce and talent management: The study reveals a notable rise in job vacancies and challenges in filling specific roles. Increased job vacancies for professional workers were reported by 31% of businesses, and 14% were unable to find suitable candidates for clerical workers, technicians, and service and sales workers. This calls for a renewed focus on talent acquisition, skill development, and retention strategies.
SMEs and the ESG agenda: Nearly 50% of SMEs are now required to provide ESG information, highlighting the growing importance of sustainable practices. However, the report identifies a gap in the ability to generate and manage this data, presenting both a challenge and an opportunity for SMEs.
“In these testing times, SMEs must pivot towards innovative strategies to navigate the complexities of cost pressures, talent retention, and sustainable practices. Our research not only identifies the critical hurdles but also offers a roadmap for SMEs to emerge stronger and more agile,” says Nilusha.
The roadmap recommends the adoption of digital technologies, enabling SMEs to streamline operations, reduce costs, and enhance productivity. It also emphasises the importance of embracing sustainable practices, not only as a regulatory compliance measure but also as a strategic move to attract new business and customers.
It also encourages SMEs to develop and retain top talent through continuous learning and development opportunities.
In this rapidly evolving landscape, the role of accountants, especially those in small and medium-sized practices (SMPs) can be pivotal. Accountants are not just financial stewards but strategic advisers who can guide SMEs through complex challenges such as managing rising operational costs, navigating new regulatory requirements, and implementing effective ESG practices. Their expertise in financial management and strategic planning is crucial for SMEs to optimise resources, identify cost-saving opportunities, and ensure compliance with evolving regulations.
To access the full report please visit https://bit.ly/3NU1uKU