The future of Africa as an emerging market economy hinges on the success of its courageous entrepreneurs who are rising up daily to confront the challenges of rising unemployment and poverty through entrepreneurship. Footprint to Africa exclusively interviewed Nikki Summers the Director of Sage One in East and West Africa – a foremost manufacturer of accounting and business software on the accounting needs of these African business owners.
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What’s your assessment of the accounting practice in West and East Africa?
SMEs don’t require auditors or chartered accountants; they just need someone that can help them with basic accounting and bookkeeping. That is where there is a big gap in the market in both East and West Africa. Both regions are starting to shift to more modern accounting practices. When we talk about modern accounting practices, we mean working where and when it suits you with mobile access to software like our Sage One Accounting solutions. Sage One is a simple, secure and affordable online accounting for small, growing businesses.
Accessible 24/7, it allows you to grow your business and offers a simple way to get things done. It gives you the power to control your businesses from the palm of your and to connect your accountant and other people in your business with real time and intuitive financial information.
How are these products addressing the gaps and increasing impact on business operations?
We strongly believe in creating collaboration between the small business and the accountant because these entrepreneurs don’t have accounting degrees. So we offer Sage One Accounting for business owners and managers, and we also have an accountant’s edition.
SMEs know how to run their businesses – that’s their passion; they’ve got an idea and they need an accountant to assist them with their bookkeeping to ensure that they are running a profitable business and that they are keeping within legislation.
A start-up small business cannot necessarily afford a full-time accountant to work for them, so what we are trying to do is make it easy for part-time accountants and accounting practices to collaborate with their small business clients using our online software.
We encourage in-product messaging, where SMEs and accountants can easily communicate in the interface of the software. For example, when you make an entry, you can send a message to alert your accountant immediately.
If we can marry accountants with start-ups, we will have a lot more successful start-ups in both East and West African regions that can positively impact the economy of their countries.
SMEs contribute significantly to the GDP of a country, but most people ignore that and look at the big enterprise companies that bring in billions. The biggest employer of labour in East and West Africa is the SME segment. So it’s in everyone’s interest to help SMEs succeed.
What’s the response to cloud based computing in these regions?
In West Africa, one barrier to entry for cloud-based application is the cost of internet connectivity. Secondly, people generally worry about security because the data is not with them. However, it is more likely that someone can steal an external drive device with all your information on it, than hack it out of the cloud. Would you not rather have it secure in the cloud than having it on a memory stick that anyone can pick up?
That said, I’m finding that more and more customers are asking less about security and people are becoming more and more comfortable working over the cloud. Accounting in the cloud is relatively new, so we need to keep educating the market. People are familiar with the benefits of desktop-based accounting, but the more you start talking to them about mobility and how much they can do their work on the fly, the more it fascinates them.
Our statistics show that SMEs spend an average of about 52 hours a week on doing administrative tasks. Now you can say to a small business, “well while you are sitting in traffic you can do your administrative tasks on a mobile”; “while you’re sitting in front of a customer, instead of having to go back to the office to generate your quote, you can generate it right there on your device.”
The more they start seeing that value, the more I’m seeing adoption of cloud applications. To give you an idea, at the beginning of the year, we were probably getting around 10 new customers in a month for the cloud application. In September, we got 80 new customers, so the adoption of cloud application is increasing at a rapid rate.
From an East African perspective, connectivity is really good and it is relatively cheap, so we are also expecting uptake to grow in this region. When it comes to financial data, Kenya in East Africa is very advanced in terms of mobile apps especially with mobile money. From an accounting perspective, a lot can be done around education on that front.
What are the barriers to SME business growth from an accountant’s perspective?
I always paint this picture when I talk about the biggest challenge facing a small business or a start-up: I’m a start-up business and I’ve got this box in a corner and I keep throwing in my receipts, invoices and stuff in there. But I truly don’t know what is going on in my business. I don’t really know who I owe money to. I don’t really know who owes money to me.
I’ve got money in the bank but is it actually my money or do I still need to pay for a lot of supplies? The biggest challenge for the SME is that when you’re running a manual system, you don’t have a real time view of what is actually happening in your business.
The minute you start putting systems and processes in place and actually start using automated processes, it will make you so much more successful because you can actually make informed, educated decisions based on actual data. Your guesses and estimates without financial data can be very different to reality.
Over 60 per cent of SMEs fail in their second year of operation because they actually don’t know what is going on in their businesses. So if you can get a tool that can give you proper insight into your business you can be far more successful. For example, you’re selling multiple types of food in your shop, and you’ve stocked a certain amount of each item. Without running a system, how do you know what stock you’re running out of and how much your stock is costing you? How do you know what inventory line is successful and which one you’re not making a profit on?
Knowing what is going on in the business and making informed decisions is what makes SMEs successful and that is what Sage One is doing – making SMEs become successful without having to spend massive amounts on infrastructure and expensive accounting systems. As an SME, I just need to know what inventory I have; who are my debtors; who are my creditors; am I making a profit or loss; and how much money do I have in the bank? SMEs that have this information at hand are the ones that will succeed.
How should SMEs choose their accountants?
You’ll want to have someone that is certified by an accredited institute and who can perform the duties reliably and affordably. That takes me back to where I was talking about most SMEs not requiring a full-time accountant because that is a cost that they afford to carry.
SMEs can capture the data themselves; they just need someone to do accounting tasks like income statements, trial balances and so forth. We are hoping for bookkeeping firms to offer SMEs services for two days in a month, instead of these SMEs having to pay them for the entire month.
What level of technical training is required to use Sage products?
Users may need some training to maximise their use of enterprise products like Sage X3, Evolution ERP and Sage 50. But the Sage One product doesn’t really require intensive training because we have made it easy to use.
For example, in the product, we don’t speak in accounting terms. We don’t use the words debit or credit – we use the terms increase or decrease so that a business owner that doesn’t have financial training know what he is doing.
We also take into consideration that SMEs generally do their administrative work after-hours, so we put a lot of in-product help and created a lot of small video clips with step by step processes on how you can create an invoice or how you can create a quote.
We make it as easy as possible for SMEs because we understand that they cannot spend two weeks on software training – they can spend two days learning about it after-hours.
What has been the market’s response to Sage 50 two months after it was launched in both regions?
There has been great response from third-tier SMEs in the manufacturing sector.
What can government and the private sector do to build capacity building for new business entrants?
Everyone had a big wakeup call when the oil prices crashed – it impacted the Nigerian economy quite badly. The upside is that it has highlighted the potential and the importance of other sectors. Now government and private sector are sitting up and are realising that a country should not just depend on one commodity such as oil, and that there is a need look at what other sectors, especially the SMEs, and what they generate for the country.
Over the last four months, I have seen a massive increase in government’s focus on SMEs as well as the private sector trying to assist.. More can be done, and in the next 4 – 6 months, we will be seeing a lot more.
For example, one of the initiatives that we at Sage are supporting is the BusinessDay SME Market Access Day happening in Lagos in November. We are running a workshop, which is not just going to be about Sage One products, but also about SME bookkeeping fundamentals – what should SMEs be looking out for? We will also be supporting them with some tools that can assist them.
To be a successful entrepreneur, you’ll have to have that perseverance because you are going to get knocked down and you’re not going to stay down but get back up. Successful entrepreneurs will tell you that the first business they started may not have been successful, but they didn’t give up. Entrepreneurs are dreamers who make big sacrifices for their businesses and we are trying to help them turn their business dreams into reality.
What’s your assessment of Africa’s growth potential?
Africa is one of the biggest growth points in the world. If you look at the amount of investment going into Africa, you’ll know that it’s an emerging market with massive potential. I’m really excited at what the potential will be in the next 2 – 3 years and I think we are going to surprise ourselves.