SMEs’ digital future

What role for accountants?

Briefing paper

SMEs
June 2021
Highlights

Many small and medium sized enterprises (SMEs) in Europe are technology innovators or
have taken major steps towards digitalisation.

But many less digitalised SMEs still struggle with digitalisation. Their attention may
instead be focused on immediate business survival or day-to-daywork, particularly
following the COVID-19 pandemic.

This paper sets out how professional accountants help SMEs with digitalisation. It
explains:

 why digitalisation is essential for SMEs

 how professional accountants can help SMEs to digitalise
 how EU and national policymakers can support the digitalisation of SMEs

The paper is intended to help policymakers and others understand how accountants can
help SMEs to digitalise.
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Introduction
The COVID-19 pandemic showed how important it is for SMEs to digitalise. Digitalised businesses are better
placed to face the economic and social challenges of working through a crisis.

Digitalisation helps businesses become more efficient and more diverse, access new markets and clients. This
makes it easier for SMEs to compete, including with large companies. Digitalisation boosts innovation,
promoting services likely to help companies grow and prosper. This can also make it easier for companies to
face daily business challenges.

SMEs’ role in a digital economy should be recognised by policymakers and by businesses themselves. This
paper explains how professional accountants1 can help SMEs to become digital.

Digitalisation challenges for SMEs

Many SMEs in Europe are already leaders in information and communication technologies (ICT). They may
operate in a highly digitalised industry or have taken steps towards digitalising their business operations.

The European Digital SME Alliance, for example, represents 20,000 digital SMEs in Europe. But with some 23
million to 25 million SMEs thought to be operating in Europe, many more are missing digitalisation opportunities.
The SME landscape in Europe is very diverse. It includes companies that are themselves developing new
technologies, and companies that have to follow and adapt. Leading, developer companies need a flexible
environment to contribute to the digital transformation. The followers are SMEs that use traditional business
systems and might struggle to see the immediate relevance of the digital transformation.

A successful European digital transformation will need SMEs. An important question today is how can traditional
followers keep up with digitalisation? Many obstacles remain, as was shown in a recent survey by Accountancy
Europe (figure 1).

Figure 1: obstacles to SME digitalisation

The main obstacles to digitalisation were shown to be a lack of resources, both financial and time, and the skills
of existing staff. A lack of awareness of digitalisation and its associated business opportunities was also a
challenge.

1
Throughout the paper, ‘accountants’ and ‘professional accountants’ will be used interchangeably. In either case, the
meaning is ‘professional accountants’, i.e. ones that have passed relevant professional qualifications and are members of
a recognised professional body.
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SME ecosystem
SME entrepreneurs are experts at running their own businesses. Many SMEs of different sizes are already well
on their way to digitalisation. This includes some SMEs whose business models are not based around ICT, but
that have already independently taken major steps to digitalise their businesses.

But many other SME owner-managers are too busy with day-to-day business survival and have no time to
consider long-term digital strategy. The COVID-19 pandemic has further sharpened this focus on keeping small
businesses running.

Now more than ever, it can seem difficult for SME owner-managers to plan and implement changes that have
no obvious immediate benefit. It is then up to experts in the wider SME ecosystem (see figure 2) to advise, guide
and support SMEs on their path towards a digital future.

Figure 2: SME ecosystem

SMEs can count on their accountants

Within this ecosystem, accountants, most of whom are themselves small business practitioners, are particularly
well-placed to help. They can promote business practices’ digital transformation among their SME clients,
advising on first steps. This is particularly relevant for those ‘followers’ who have not yet taken or struggle with
taking major digitalisation steps.

Accountants can help with digitalisation because:

 professional accountants are trusted advisors to SMEs

 most SMEs in Europe already rely on accountants for services such as business planning, financial and
cashflow management, tax and compliance, bookkeeping, and financial advice
 SME owner-managers meet with their accountants regularly
 SMEs rely on accountants to advise, and to challenge assumptions about running their business
As any individual accountant or accountancy firm may have hundreds of SME clients, they also have extensive
experience of what works for businesses. Accountants thus understand the underlying fundamentals of the
businesses they serve.
When it comes to digitalisation, accountants are well-placed to help SMEs by:
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 using their understanding of the business to identify, assess and advise on risks and opportunities
 employing their legal, compliance, internal control, and data knowledge to propose cost-effective and
tailored steps to digitalisation
 flagging potential risks and benefits, even when the accountant’s core expertise does not enable them
to help an SME with specific digitalisation strategy
 referring an SME owner-manager to specialist experts in the broader SME ecosystem, where
appropriate

How can accountants foster SMEs’ digitalisation?

Accountants can support SMEs’ digitalisation in two major areas:

 digitalisation of accounting systems and data

 business model digitalisation and transformation

Example
Cyril Degrilart (CNCC and CSOEC, France) and his small accounting practice’s main objective is to provide
the same quality of service for SMEs as the one larger compagnies get. His team helps smaller businesses
build efficient digitalisation strategies through data analysis and visualisation. SMEs need smart and
simple comprehensible key performance indicators (KPIs) to set up a business strategy. This accounting
practice analyses SMEs’ data then communicate KPIs with graphs and visuals. This allows SMEs to better
understand their performance, access relevant and up-to-date information about their business and
ultimately improves decision-making. Read more.

Most accountants are not and should not strive to be IT experts. It is however important for accountants to
know which digital solutions, such as analytic or data cleaning tools, can help their clients’ digital and business
transformation. The actual implementation of solutions can then be carried out by IT experts.

Accountants, in particular small and medium sized practices (SMPs), can gain this insight by first digitalising
their own accounting practices. This is often the best way to understand how to help their SME clients digitalise.

accounting systems and data Digitalisation

Running any business or organisation depends on the availability of information needed for day-to-day
operations. E-accounting systems and data digitalisation can make it easier to collect, make available and
analyse this information in new ways.

Many accounting firms already use e-accounting systems and data digitalisation. For SMEs, this can lead to
better business planning, more effective reactions to changing circumstances, and improved predictions about
their own business outlook.

Accountants’ efforts to help SMEs digitalise their business operations and processes can be seen as three
steps:

 data collection
 data processing
 data analysis

Data collection
The first step towards digitalisation for an SME is making sure that reliable business data is available.
Digitalising bookkeeping and accounting gives SMEs more detailed and increasingly real-time data about their
business performance.
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Accountants can help SMEs to:

 plan and improve cost effective data digitalisation. Accountants can assess the business value of
digitalisation measures. They can also ensure that new systems are smoothy integrated into the
business
 digitalise accounting processes to deal with new requirements such as real-time reporting, digital tax
compliance, e-commerce and e-invoicing, or online sales transactions and payment platforms
 design internal processes and develop SMEs’ digital skills in areas such as cybersecurity, internal
controls, and financial statement systems
 support with legal aspects such as the EU’s General Data Protection Regulation (GDPR). This is
necessary for instance for moving data to the cloud or for establishing Customer Relationship
Management systems

Data processing

The next step towards digitalised data collection is smooth and automated data processing. This means that
data collected from digitalised bookkeeping, customer transactions and payments across different platforms is
automatically integrated and clearly displayed in a central data system.

Accountants can also help SMEs to:

 centralise and integrate all SME data sources into merged data sets. This data includes online and
physical transactions, payment information from banks and online payment platforms such as PayPal,
and e-wallet payments .
 set up key performance indicators (KPIs) and dashboards to assess data visualisation, perhaps using
software like Microsoft Power BI. This enables better monitoring of cash forecasts, sales, revenues,
expenses, and business solvency. KPIs should be based on data from the previous 3 to 5 years, when
possible.
 encouraging a shift from cash accounting to accrual accounting, if relevant for the particular business.
Accrual accounting helps businesses to manage balance sheets more effectively. This transition is
simplified by automated record keeping and data centralisation.

Data analysis

Digitalisation, in the form of automating data collection and processing, means that much of the traditional book-
keeping and reporting services offered by accountants will eventually disappear. This does not mean SMEs will
no longer need accountants. Digitalisation and automation will free up time for the accountant to provide
services related to data analysis and business insight.

Moving forward, SME owner-managers may also need help interpreting and analysing data for business
planning. This could include more accurate forecasting, or timely interpretation of early warning signs (see our
publication SME risk management: insolvency risks). This business planning may also include support setting
up added internal controls, or measures to mitigate identified potential future risks.

The SME should by this stage be comfortable with digitalisation, thanks to the digitalisation of accounting
systems and data. This makes it possible to move onto digitalising other aspects of the business.

Business model digitalisation and transformation

The “data-related” digitalisation outlined above should help SMEs switch to an e-business model. This can
mitigate solvency risks through better forecasting, as well as using automated and centralised record-keeping
and KPIs to develop better business planning. Data-related digitalisation can also make the business fit for e-
commerce compliance in areas such as VAT.

Accountants can play a key role in this transition to e-business. They can explain the benefits of moving online,
helping the owner-manager develop an e-business strategy. This could include a focus on:
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 organisational education
o support internal business re-organisation and simplifying processes
o promote standardisation and inter-operability between systems and procedures
 HR
o set in place continuous training 2 for SME managers’ and staff
o help HR services adapt to a digital business model
 digitalisation of core business processes
o digitalise tax compliance systems, for instance to help the business align with EU VAT rules for
e-commerce
o introduce online expense and production costs monitoring
o set up online sales, e-billing, marketing and customer support
 business model transformation
o adopt a quality-focused online customer relationship management system, as part of an over
arching business plan
o encourage businesses to use online warehousing with support from third-party logistics
providers when needed
o give new meaning to the use of physical space of the business e.g.: office space, which is no
longer necessarily the usual place of interaction for digitalised businesses

Recommendations for policymakers

Policymakers, at both EU and national levels, are already making great efforts to foster the SMEs’ digitalisation.
We believe that the following priorities could be particularly helpful:

 education and training systems for a digital economy. These programmes need to be updated to
include basic and advanced digital, personal and business-finance skills. Schools need to encourage
adaptability and life-long learning
 financial instruments to cover risks linked to the digitalisation of SMEs, at local, national, and European
levels. Many SMEs struggle to find traditional funding to cover intangible investments such as software
and innovation
 centralised digital expertise portals to provide SME entrepreneurs with free information and support
on all aspects of digitalisation, especially cyber risks. The portals should also help SMEs to share best
practices with digitalisation experts and other SME entrepreneurs
 bring together European experts from different SME backgrounds into innovation hubs. to facilitate
discussions on the challenges of digitalisation for SMEs, as well as to exchange best practices and
recommendations from different countries
 digitalise tax administration and company account registers to simplify reporting and tax compliance,
through real time reporting and automated tax returns
 set up a website for registration with local, national and EU regulatory authorities to make it possible
for SMEs to sign up for regulatory obligations at a one stop shop

DISCLAIMER: Accountancy Europe makes every effort to ensure, but cannot guarantee, that the information in this publication is
accurate and we cannot accept any liability in relation to this information. We encourage dissemination of this publication, if we are
acknowledged as the source of the material and there is a hyperlink that refers to our original content. If you would like to reproduce
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