Part II contains the management controls required (strategies, plans, policies, procedures, performance measures and checklists) to facilitate you to provide optimal operational support (finance, IT, etc.) to production and customer functions of your SME (described in Part I). It also contains twelve practical recommendations for your consideration in implementing management controls for SME’s.
This book is about ‘How to manage your SME better’.
What’s the need for this? Well, because of the impact of these types of businesses to the world economy and their particular problems they face. As various studies and surveys have estimated, more than 90 % of the world’s businesses are small to medium-size enterprises (SMEs). What does SME stand for?
‘SME’ stands for small and medium-sized enterprises.
The main factors determining whether a company is an SME across the world are: number of employees, turnover or balance sheet total, assets, or a combination of these depending on the country (U.S.A., Australia, Canada, Europe, etc.1).
As an example: In the European Union small companies have up to 50 employees, while medium-sized ones have up to 250 employees; in the U.S. small companies have up to 250 employees, while medium-sized ones have up to 500 employees; and in Australia the corresponding numbers are 15 and 200, etc.
What do you think of this? Are you surprised, a little bit? Don’t be. SMEs are, on average, the businesses that are generating growth, creating jobs, growing faster and innovating more and more. More importantly, they are a good deal less complicated (structurally) and more effective, efficient and flexible than are large firms.
Some of the findings of a recent study on about 10,000 organizations2 across twenty countries were the following:
1. Among private-sector firms, those owned and run by the founders or their descendants, especially firstborn sons, tend to be badly managed;
2. Firms with professional (external, nonfamily) CEOs tend to be well managed; and
3. Multinationals appear able to adopt good management practices in almost every country in which they operate.
Small and medium-sized businesses are the most vulnerable to fraud because they often don’t have effective internal controls. You could also paralyze your business trying to cover every possible contingency. However, by removing opportunity and motivation for fraud and theft, and ensuring you have systems in place to discourage errors and identify mistakes and anomalies quickly, you are able to discourage fraud in the first place and, if that fails, you can take corrective action to minimize losses.
This guide will help small and medium-size business owners look critically at their business and examine whether their procedures adequately minimise risks and promote best practice within the firm.
Small businesses are known for having weak internal controls and this guide aims to focus owners’ attention on what to look for when reviewing the business.
Owners/managers hold the key to the fight against internal control failures and must be attentive to the concept and issues of internal controls to maximise the business potential and minimise the risk of fraud, error and loss.
How can you handle, organize, manage and control these effectively and efficiently, at the level of Small to Mid-Sized Enterprises (SMEs)?
My consulting experience and other research evidence have taught me that strong, efficient, effective and high-performing Business Management Controls are required. In other books and articles I have written before I deal with the greater topics of both business controls (in a general sense for large companies and public organizations) and for the IT function (in particular in a very detail fashion).
This book ‘How to manage your SME better’ expands on the particular issue of improving your management controls for your small to medium-sized business enterprise.
All these activities are carried out by the people of the specific business departments or functions on the basis of executing the strategies, policies and procedures and monitoring their own and the overall company performance: integrated management controls. How these fit in your business environment is shown in Figure 1.