With a strategic focus on technology integration, sustainability reporting, and regulatory reforms, businesses can enhance transparency and accountability in the modern financial landscape.
As the global economy continues to evolve rapidly, the importance of inclusive financial reporting practices has never been more pronounced—not only for large corporations but also for Small and Medium Enterprises (SMEs).
As acknowledged by seasoned leaders in finance, accounting, and strategy during the Association of Chartered Certified Accountants (ACCA) Nigeria’s “IFRS in a Changing World” seminar in Lagos, SMEs form the backbone of many economies, contributing significantly to employment and GDP. However, they often face challenges in adopting comprehensive financial reporting standards, which can impede their growth and access to funding.
Addressing these challenges is crucial for fostering transparency, accountability, and sustainable growth.
The importance of inclusive financial reporting
While financial reporting is a statutory obligation, it is also a vital tool for business management and stakeholder communication. For SMEs, effective financial reporting can unlock access to funding, partnerships, and market opportunities. However, the complexity of International Financial Reporting Standards (IFRS) and resource constraints often hinder SMEs from fully leveraging these benefits.
“As business leaders and stakeholders, it’s imperative to address emerging issues like technology integration, sustainability reporting, and regulatory reforms,” said Ms Oluwafemi Elias, the former Head of Registration and Strategy Lead at the Financial Reporting Council of Nigeria (FRC), during the seminar. “This involves tackling challenges faced by large corporations and equipping SMEs with tools for accountability and transparency.”
Integrating technology to catalyse change
Technology is transforming the way businesses handle financial reporting. These digital tools and platforms offer SMEs a remarkable opportunity to streamline their financial reporting processes. Automation, cloud-based accounting software, and data analytics can simplify compliance with financial regulations and standards, making it easier for SMEs to maintain accurate and timely financial records.
“Technology acts as a bridge, enabling SMEs to overcome traditional barriers in financial reporting,” Elias noted. “By adopting digital tools and appropriate technological solutions, SMEs can streamline their accounting processes, reduce errors, save time, and ensure that their financial statements meet regulatory requirements.”
A study by Intuit revealed that small businesses using cloud-based accounting systems experience improved financial management and decision-making capabilities, with 88% of SMBs saying moving to the cloud would help to keep their accountant ahead of the technology curve. This enhances operational efficiency and builds credibility with investors and financial institutions.
Beyond the numbers
Sustainability reporting—encompassing environmental, social, and governance (ESG) factors—is gaining traction as stakeholders increasingly demand greater transparency on how companies impact society and the environment.
“Sustainability reporting is not just for large corporations,” stated Babajide Ibironke, CFO of Abuja Electricity Distribution Company (AEDC), another speaker at the seminar. “SMEs can significantly benefit from demonstrating their commitment to sustainable practices. It builds trust with stakeholders and aligns business operations with global sustainability goals, opening doors to new markets and funding opportunities.”
Research indicates that companies engaging in sustainability practices often experience increased customer loyalty and brand value. For SMEs, integrating ESG considerations can provide a competitive edge in local and international markets.
“The future of financial reporting lies in inclusivity and adaptability,” Elias corroborated “SMEs that proactively integrate technology and sustainable practices into their reporting will be better positioned to navigate challenges and seize opportunities in the global market.”
Supporting SMEs through regulatory reforms, education, and training
Navigating complex regulatory landscapes can be daunting for SMEs. Simplifying regulations and offering support can encourage more SMEs to adopt comprehensive financial reporting practices.
“Regulatory bodies must consider the unique challenges faced by SMEs,” Ibironke advocated. “Policies should be scalable and flexible, ensuring compliance is achievable without imposing excessive burdens.”
In Nigeria, for instance, the FRC has been working on frameworks to simplify financial reporting standards for SMEs. Such initiatives aim to reduce the compliance gap and integrate SMEs into the formal economy, thereby stimulating overall economic growth.
Empowering SMEs with knowledge and skills is also essential for effective financial reporting. Training programmes and workshops can equip business owners and financial managers with the necessary competencies.
“Education plays a pivotal role in transforming financial reporting for SMEs,” explained Ibukun Oyedeji, CFO of Ecobank Nigeria. “Providing practical training and resources empowers SMEs to confidently manage their financial reporting processes.”
Organisations like the International Finance Corporation have highlighted the importance of financial literacy in boosting SME success rates, highlighting the need for capacity building within the SME sector.
Collaboration for a sustainable future
Stakeholders across the spectrum—including regulators, industry associations, financial institutions, and technology providers—must collaborate to create an ecosystem that supports SMEs.
“Collaboration fosters innovation and ensures that solutions are holistic and impactful,” Oyedeji highlighted. “By working together, we can develop tools and frameworks that address the specific needs of SMEs.”
Global partnerships, such as those facilitated by the International Accounting Standards Board (IASB), are instrumental in harmonising financial reporting standards and making them more accessible to SMEs worldwide.
As the business environment continues to evolve, SMEs must adapt to remain competitive. Embracing technology and sustainability in financial reporting is not just about compliance but is a strategic move that can drive growth and resilience.
By prioritising transparent and accountable financial practices, SMEs can unlock new avenues for funding, partnerships, and expansion, contributing significantly to economic development.
