Uhasibu Launches The Project Based Accounting Module For SMEs In East Africa
Small and Medium Enterprises (SMEs) have demonstrated their ability to transform the socio-economic setup of a nation by quantum leaps. This is mainly attributed to the fact that they require comparatively less capital and less managerial certification to start and manage; with reference to big companies. It is for these reasons that SMEs are mushrooming in every parts of East Africa.
According to the 2012 Economic Survey, and taking Kenya as a case study. Kenya is home to thousands of SMEs which in aggregate contribute to 20% of the country’s annual GDP. In the year 2011, SMEs in Kenya created 445,900 new jobs, which is about 85.7% of all the new jobs created in Kenya. It would be rational conclusion to say that SMEs can are formidable contributors to socio-economic development especially in developing countries.
However, there seems to be one challenge that is greatly compromising the effectiveness of SMEs. This is the shortage or complete lack of seed fund capital. Thus SMEs have to rely on donations, grants and investment from other stakeholders. For SMEs lucky enough to get this funding, there is another challenge that soon crops up; accounting for the donations, investments and grants. Although a fairly good number of SMEs have already adopted some form of accounting system, a lot of these accounting systems are meant to do the financial reporting for the whole organization. Without specifically accounting on how the donation, grant or investment money has been used.
This leaves the business at a very precarious position when they want financial reporting for the SMEs funding; the only option left would be to sift through the accounting report for the entire organization and pick out details related to funding. If the business in question receives funding from a number of different organizations, the task would be even much harder. Especially if the funds accounting report are required fast, it would be very hectic to pick out the relevant accounting details from all of the organization accounting details.
According to Uhasibu, “The project based accounting module, will help them keep track of income and expenses at the project/grant level. The funded company simply declares in its books a project which would then represent the donor and under this project, they register the exact amount of money they have received from the donor as well as register any expenses that they incur while using the funding. Eventually, the company generates a report that includes ONLY details of the funding they received from the specific donor without affecting the reporting for the entire company or affecting the reporting for any other funds they have received!”
According to Uhasibu, SMEs stand to achieve efficiency in accounting if they shift from their basic accounting to the project based accounting module. This would enable the SMEs’ managers to clearly know their income and expenses details at the grant/project level; and improve on their operations and cost efficiency.
The reports that will be prepared by the SMEs which have adopted the Project Based Accounting will boost their level of trust towards donors, investors and grantors. In the long run and with such impressive accountability, SMEs stand a better chance of getting more subsequent funding.