The pandemic prompted a big spike in SMEs relying on trusted advisors

Craig Michie, Group Executive, Client Acquisition and Asset Finance at ScotPac Business Finance

SMEs are more likely to turn to someone for business advice than they were four years ago, according to a study by Australia and New Zealand’s specialist SME non-bank lender ScotPac.

ScotPac senior executive Craig Michie said ScotPac’s latest SME Growth Index recorded a significant decline in the number of business owners who have to ‘go it alone’.

“Running a business can be lonely at any time let alone in challenging conditions, so it’s great to see many more SME owners having a trusted advisor to lean on,” Mr. Michie said.

“In our 2017 research, four out of ten business owners had no trusted advisor.”

“However, this is now down to less than one in ten. More than 90% of respondents are now having a trusted person that they turn to for business advice ans it’s a promising trend.”

“However, key small business consultants including accountants, bookkeepers and brokers still have a lot of work to do to in order to top the ‘trusted advisor’ list for SMEs.”

Who are business owners turning to?

Mr. Michie said that despite the reassuring decline in business owners who feel that they have to go it alone, one issue remains. Where is the trusted advice coming from?

“The pandemic highlighted cost containment and thus SMEs may be seeking advice from those they trust but where costs aren’t incurred, as opposed to sourcing professional advice.”

“While SMEs have indicated that accountants and bookkeepers have been invaluable in providing advice to navigate pandemic grants and support, and brokers have played a key role in securing funding, the fact is that SMEs continue to put more trust elsewhere.”

Business colleagues were named as the most trusted advisor by 38.6% of respondents, with suppliers or trading partners being the go-to for 22.2% of small businesses.

“Small and Medium Enterprises are only slightly more likely to name their accountant as their trusted advisor (11.2%) as they are to turn to their friends (8.5%).”

“However, accountants are moving up the list, with a 22% increase since 2015 in SMEs naming their accountant as their most trusted source of business advice.”

ScotPac’s SME Growth Index is Australia’s longest-running in-depth research on small business growth prospects, polling a representative sample of 1255 small businesses.

The research found small business operators are almost twice as likely to have a family member as a trusted advisor (6%) as to have their broker in that role (3.3%).

Only one in 100 SMEs have their bank manager as a key trusted advisor – this has decreased over time, trending down from 4.2% in 2015 to 3.4% in 2017, to 1.3% now.

“Smaller businesses (those with $1-5m annual revenue) are much more likely to rely on family and friends for their advice or to go it alone. One in ten smaller SMEs, but only one in a hundred larger businesses, have a family member acting as their key advisor.”

The positive impact of professional advice

Business strategy can be adversely affected by relying on someone other than those with professional qualifications or industry accreditation like accountants and bookkeepers.

So it is reassuring that while starting from a low base, the historic trend in SME Growth Index research is that accountants are trending upwards as the most trusted advisors.

Accountants were trusted advisor by 9% of SMEs in 2015, 9.3% in 2017 and 11.2% in 2021.

ScotPac launched a $100m SME Bounce Back Fund to ensure as many businesses as possible can access fast funding to deal with working capital needs as the economy rebounds.

When asked how they deal with cash flow issues, almost one in five SMEs (18.6%) said they got on the front foot thanks to applying their accountant’s pandemic recovery advice.

5.3% put in place recovery recommendations from their broker to ease cash flow constraints.

The arc of brokers and bookkeepers as trusted advisors will be tracked as of this round (these categories were not available in previous Index rounds).

“External professional advice has no doubt been crucial to the four out of 10 SMEs who say they have restructured in the past 12 months,” Mr. Michie said.

“Key SME pain points this round were new taxation imposts and supply chain disruption – problems that may be successfully navigated with external professional advice.”

Businesses identifying as “growth mode” are almost twice as likely to have an accountant as their main trusted advisor, compared to no-growth SMEs (14% compared to 8.3%).

No-growth SMEs (7.7%) were almost twice as likely to rely on a family member for advice than their growth counterparts (4.3%) or to have no trusted advisor (9.7% against 5.7%).