Interview: Christos Titsinides answers below to our questions about Accounting, Consulting and Support in SMEs
Christos Titsinides, founder of the firm Conficta Services is a fellow member of the ACCA-Association of Chartered Certified Accountants and ICPAC-Institute of Certified Public Accountants of Cyprus. With an experience in the accounting profession of over 20 years and a rapidly expanding firm situated in the city of Limassol in Cyprus, Conficta Services can provide you with the best possible quality of services for businessess and individuals. Their aim is to serve their clients and keep them satisfied throughout the years, which is reflected in the increasing numbers in their portfolio.
- What is the definition and the main characteristics of SMEs and what is the maximum yearly turnover allowed to qualify as an SME?
The definition of the SMEs, which is the translation of their acronym is Small-Medium Enterprises. These consist the majority of businesses not only in Cyprus but in EU as well.
The main characteristics for a Cyprus SME are technically numbers taken out of three main and important figures within a business financial status: the number of turnover (net of related costs), the value of net assets on the Statement of Financial position i.e. Balance Sheet and the average number of employees. These three figures are taken at the year-end date of a business and according to the numbers shown, a small business is defined only if the net turnover is less than 4m, net assets less than €8m and the number of employees is less than 50. Similarly, a medium business is defined as such if the above numbers are less than €20m, €40m and 250 respectively.
- What kind of advice or support can be offered by external accountants to maximize SME’s performance?
Firstly, and in my opinion, I believe that the only one that knows precisely and 100% what is going on within his business is the business owner. He is the only one that can do or undo any improvement for success or drawback and all what has been done in his business collapse.
Of course, this is no reason not to seek professional support and advice from an external accountant. Provided that he is a qualified professional accountant with enough experience to deal with SMEs, I believe he is a trustworthy, reliable, and beneficial partner for any business to rely on and be supported on an ongoing basis. At least this is what we have been doing all these years during our course in the profession. Furthermore, the advice and support that can be given varies depending on the nature of the business, the future plans set, if the ways to achieve targets are attainable or not etc. This is something that is thoroughly discussed on an ongoing basis between the accountant and the owner of each business and adapts any changes that require it to comply with the relevant circumstances.
- What are the 5 most important key performance indicators (KPI’s) you monitor to track and evaluate the progress of a SME?
The KPI (Key Performance Indicator) of an SME varies from another’s. But I believe that some of them are commonly used by SME’s internally (primarily for their own progression and improvement) and are the ones from which the most significant and crucial decisions are based on. It doesn’t mean that the KPI will necessarily comprise of monetary value but also of the structure and the non-monetary values of a business.
Having said that, in my opinion the five most important KPIs are:
b) Customers/Clients turnover
c) Profitability margins
d) Debts versus Equity
e) The ownership of the business
These may act isolated from each other or combined to allow us to form an opinion on how good or bad an SME is doing in any aspect that affects it. However, although there is a huge number of KPIs to use, there are some of them that we consider as additional indications but having in mind that we are dealing with SMEs I would say that the above five are contributing the most to the progress of an SME.
- Can an external accountant be equally worthwhile for SMEs as an internal accountant or are there any tasks that cannot be performed by an external?
An external accountant that provides his services outsourced can be equally and sometimes even more advantageous for an SME than an employed accountant. I highly and strongly recommend this approach from SMEs as this is a beneficial approach for them. However, and I must share this with you in order to be fair with everyone, in all these years in my career I have seen people that they had everything in terms of diplomas, skills and know-how but couldn’t support their qualifications and experience and on the contrary people that they had only a high school degree and they have been the best managers that anyone could ask for! Firstly, and most important, we consider that both individuals have the same and equal qualifications and experience. Otherwise, there is no reason to compare a qualified accountant that is a member of a recognized body such as ACCA, ACA etc. and with experience of more than 20 years with someone that does not have the minimum qualifications or no qualifications at all. From thereon, it depends on the business nature, industry, and complexity whether they prefer to have someone in-house or outsourced. Of course, the financial cost of paying an employee’s salary and related contributions versus the fees of an outsourced professional plus VAT is another factor that needs to be taken into consideration since there is already a minimum 6.85% reduction and cost saving approach by cooperating with an external accountant. This relates to the Cyprus SICs (Social Insurances Contributions) versus the VAT rate in Cyprus for employing or outsourced someone respectively. This is one of the differences that needs to be considered before the main decision on how to proceed with the accounting function.
- What is the most intriguing challenge that SMEs face today in our transforming global society?
The most important and yet vital challenge that SMEs are facing today is their own viability. The fact that by default they are small-medium businesses is the number one factor that drives them to an uncertain future that keeps evolving and advancing itself. Many of these businesses will be substituted and terminated by machines and AI progress that, right now, it seems inevitable. For example, ChatGPT will terminate the secretarial role in a business. This is just an example that in my opinion will be a fact in the near future. Or professions that currently need one or two employees to keep running their portfolio of clients, these employees will be substituted by machines such as drones or robotic assistance. ChatGPT seems to be a cheap and attractive solution but what happens with the rest of the options available? If an SME needs to invest additional funds to survive and for the next 3-5 years these funds will not be available due to lack of business or clients, then the going concern of this business is likely to be in bright colors.
- What are the roles of accountants in a small vs in a medium sized company?
As mentioned above, the role, duties and responsibilities of the accountant in an SME vary depending on the number of reasons. For example, and based on the figures in answer 1 above, the payroll task of a small company (a consulting company) that employs 10 employees that are paid monthly is most likely to be something that the accountant can perform during his monthly tasks. On the other hand, a company that employs 100 people (a construction company) 40% of them are paid on an hourly basis, 40% on a weekly basis and the rest of the 20% monthly is something completely diversified from the first example. And one of the reasons is that the accountant’s role here is to monitor and supervise a small team of assistant accountants that will deal with the payroll process in the different time-frame tables that are set by the company. In any case, the accountant of an SME needs to be in place for what he and his profession is. He is not just the “bookkeeper” of a business; he is the Chief Accountant, the Head of Accounting department, the Financial Controller of the company irrespective of the size. This is how he should be treated and as such empowered by his roles, duties, and responsibilities if the management of the business recognizes this status to him. This is the reason why I mentioned in my answer to question 4 above that I truly believe that an external professional is a more beneficial approach from any aspect than an employed individual.
- How important is technology for SMEs? Has your firm observed that implementing digital improvements increases their business’s revenue?
SMEs are really struggling in current days, and it all comes together to how much longer they will stand above the ground financially. There is no doubt that technology affects all of us and SMEs could not be an exemption. On the other hand, if a business cannot afford to upgrade itself it means only one thing. Let’s not forget that SMEs in Cyprus are not just limited liability companies. There are also self-employed individuals that their turnover does not exceed €30.000 (not even close to the above limit of €4m!!!) and their net profit -if they are profitable- might be just above the breakeven point. So, you realize that even if they want to progressively stay within the market or digitally improve their operations, profits, or anything else that can be digitally improved, the key element of cash is drowning them in the bottom of the ocean.
- How can a SME benefit by working with your firm?
Our firm is dedicated to each client separately for his needs and goals. The fact that we already have attractive, reduced charging rates for all services needed by an SME in return for our high-quality services makes us stand high in the crowd. In Confi-cta Services Ltd we have our own vision for clients. It comes directly from our firm’s name since Confi-dence for what we do is embedded and implemented in each service we provide. In turn, this is tailored for each client from the first meeting to get to know each other and discuss the overall situation up to the ongoing support, consultation, and advice that we provide to our clients. We stand together as one business to achieve what needs to be achieved, which is not easy but from where we stand, we believe is something that ethically and professionally we owe to our clients. And this is the reason why we are entrusted mostly by SMEs as their professional accountant, their financial controller or Chief accountant from their daily bookkeeping process up to the ongoing support and consulting. This is a great honor that we have earned from our clients, but it is also our stamina to give them back even more than we already provide them. After all, this is what we do.
As ending to this interview, I would like to say thank you to Accountants in Cyprus and Mrs. Helena Naaman for this great opportunity given to share our thoughts and experience with them and their clients. I believe our cooperation has been at high levels of quality and understanding so far and I wish even higher levels in the future.