Slides for paper delivered at the Asia Pacific Management Accounting Association Conference, Bali Indonesia 2015. The paper explores the relationship between Strategic planning, accounting information and the role of advisors in the growth of small to medium enterprises SMEs

1. Asia Pacific Management Accounting Association Conference
Denpasar Bali, Indonesia
October 26th – 29th, 2015

2. Abstract
This paper explores the association between, small to medium
enterprise strategic planning, the use of accounting information
systems and the role of accounting advisors in the growth of
small to medium enterprises (SMEs).

3. The Importance of SMEs
 SME’s employ approximately 60-70% of the workforce in
developed Western nations
 Direct positive relationship exists between business density,
high income countries and standards of living (World Bank)
 Strength of SME sector is a key factor in avoiding and
recovering from market failure
 In depth studies of SME’s growth factors is limited,
contributing factors include the time and resource constraints
of SME owners

4. Propositions
Proposition 1 Key points
i) The organisation of transferable tacit knowledge is central
to growth and viability.
ii) Ad-hoc management accounting systems complement
business tacit knowledge in SME decision making.
iii) Financial Accounting information plays a secondary role in
SME decision making.
Proposition 2
1) The role of SME advisors is to complement knowledge gaps
of an entrepreneur with specialised competencies.

5. The Literature
Proposition 1
 Gibrat’s Law proportionate relationship between growth
rates and firm size
 Penrose theory of knowledge accumulation, collective
knowledge in the context of a purposeful firm
 Ghoshal, theorised the value of a firm increases with the with
the level of experience of deployment
 Greiner’s 5 stage model later refined by Welsh & White and
Elster & Phipps 3 key enabler’s
 Osterwalder’s business model canvas

6. The Literature
Proposition 2
 The ability to influence via informational and expert power in via
contextual compatibility (Mole)
 Financial advice in planning is sort for start up financing then the
use of the plan itself is negligible (ACCA)
 Adoption of operational budgets and cash flow forecasts in first
instance but dependent on the philosophy of the CEO
 Positive relationship between adoption of operating budgets and
the growth of companies. (Davila)
 Success of advisor was dependent on the ability to gain tacit
knowledge and complement with technical knowledge (Barbera &
Hasso)
 Culture, communications and experimental learning (Dyer & Ross)

7. Research Method
This research paper presents quantitative and qualitative data
gathered via a multiple method, multi-case field research design
Data presented in this research paper includes structured
questionnaires, semi structured interviews and information gathered
from structured consulting projects and programmes
Consultation series began with a pre-programme questionaries and
meeting.
Standard interview questions were asked during the one-on-one
consulting session.
The consulting sessions were semi structured in nature due to the
different requirements of participants

8. Research Method
The research method for 43 of the 54 SME’s (79.6%) involved a structured consulting
programme.
Key modules in the program included;
 Defining business purpose and measures of success
 Maximizing staff performance through organisational culture and structure
 Understanding financial information and cash flow forecasting
20.4% or 11 of the SME data reviewed was derived from consulting projects that
consisted of company wide strategic reviews

9. The Sample
Industry (Standard and Poors GICS classifications) # %
Consumer Discretionary 30 56%
Consumer Discretionary - Automobiles - Components 1 2%
Consumer Discretionary - Consumer Services 3 6%
Consumer Discretionary - Consumer Services - Specialized 8 15%
Consumer Discretionary - Consumer Services - Education 2 4%
Consumer Discretionary - Consumer Services - Hotels & Restaurants and Leisure 4 7%
Consumer Discretionary - Media 5 9%
Consumer Discretionary - Retailing 7 13%
Consumer Staples - Food, Beverage and Tabacco 3 6%
Financials - Realestate Management 2 4%
Health Care - Providers Services 1 2%
Industrial - Capital Goods - Machinery 5 9%
Industrial - Commercial and Professional Services 9 17%
Information Technology - Software Services 4 7%
Total 54 100%
Turnover Years in Business # Staff Business Owner Education Attainment
<$250K 15 28% 1<3 20 37% 1<3 16 30% High School 5 9%
$250k<>$1m 13 24% 4<>10 20 37% 4<>10 22 41% Diploma/Trade Certificate 20 37%
$1m<>$3m 16 30% 10<>20 6 11% 10<>20 10 19% University Degree 26 48%
$3m<>$10m 6 11% 20> 8 15% 20> 6 11% Masters & Doctorate 3 6%
$10m> 4 7% Total 54 100% Total 54 100% Total 54 100%

10. Years in Business & Annual Turnover
 37% (20) of SMEs had been in business between 4 to 10 years, and 45% of those businesses generated
between $1m to $3m AUD per annum in revenue
 100% (14) of the businesses that had over $3m AUD turnover in the sample had been in business for 10
years or longer
 All Businesses surveyed had been in business for over 12 months and were financially viable

11. Annual Planning, Admin staff and
Annual Turnover
 72% of SMEs surveyed did not have an annual planning process.
 Of the 28% that did have an annual planning process, 93% employed of full time administrative
staff
 50% of businesses with over $3m AUD annual revenues did not have an annual planning process

12. Maintenance of Financial Statements
 The practice of timely preparation of financial statements improved with the
increase in annual revenues of the business.
 The key driver of the improvement was the requirement to meet tax and
external compliance reporting obligations

13. Understanding of Gross Margins &
Break Even Positions
 65% of SMEs surveyed did not have gross margin (GM) or break-even (BE) information
 89% of SMEs with GM and BE had an administrative function in place.
 GM and BE information was available to 83% of SMEs between $3-$10m AUD
 In this sample only 25% of the SMEs over $10m AUD revenue had GM and BE information

14. Use of Accounting Systems
 66% of businesses that did not use accounting software were micro businesses
that had an annual turnover of $250k or less

15. Use of ERP
 17% of SMEs surveyed employed an ERP system.
 Implementation of ERP systems were more likely as the business grew. 75% of
SMEs surveyed with >$10m annual turnover deployed an ERP

16. Key Role of Management Accounting
Advisors
Proposition 1
The rate of growth of an SME is influenced by the entrepreneurs ability
to transfer tacit knowledge from individual motor cognition to
organisational motor cognition. A critical role of management
accounting information is in the facilitation, measurement and
advancement of organisational motor cognition.
 65% of SMEs surveyed did not have fundamental management accounting
information such as gross margin and break-even information. While all SMEs
prepared Financial statements at least once per year.
 72% of SMEs surveyed, while financially viable do not prepare an annual plan
Decision making was based on ad-hoc reporting and interpreted in the light of
proprietary understanding of the industry the entrepreneurs operated. The size of
the of a firm was dependent on the success of transferring tacit business
knowledge to employees.

17. Key Role of Management Accounting
Advisors
Proposition 2
The role of an SME advisor is to complement knowledge gaps with
specialised competencies.
The opportunity for Management Accounting advisors is to provide the
tools and mechanisms to plan the use of resources, measure the
progress and success of business activity and enable an accelerated
dissemination of tacit knowledge.
The specialised competency a management accounting professional provides an
entrepreneur is the capability to transpose operational statistics into key
performance indicators that align staff accountabilities which facilitates the
efficient execution of strategic activity.
A skilled management accountant has the potential to influence decision making
on the allocation of scarce resources from sales and marketing through to after
sales service

18. The full paper can be accessed at:
http://www.putneybreeze.com.au/role-strategic-planning-accounting-advisors-apmaa-2015-
bail-indonesia/