Attitude problems hurt SMEs

 SMALL to Medium Enterprises in Papua New Guinea fail within two years because of attitude problems and lack of ethics, according to a private accountant.

Managing partner of JAJ and Associates Arthur Sam said:

“Reality in PNG is that we have problems with our attitude, time and honest ethics. We have to set standards and live by them every day.”

He was addressing conference in Kokopo, East New Britain, conducted by Certified Practising Accountants Islands regional branch.

He said studies had shown that 60 per cent of SMEs failed in the first two years, 20 per cent within five years and 20 per cent would succeed.

Sam said the Government aimed at achieving 500,000 SMEs by 2030 but 300,000  or 60 per cent were likely to fail within two years, 100,000 or 20 per cent were likely to fail within five years and only 100,000 SMEs  or 20 per cent) were likely to succeed.

“To have 500,000 SMEs to survive, we must start with 2,500,000 (2.5 million). That is 166,000 new start-ups every year for the next 15 years,” he said.

“The citizens of our country need to take ownership of this challenge. Accountants should be at the forefront of this vision and lead the charge,” he said.

He said it was crucial to understand why all SMEs must succeed, adding this was because the multiplier and compounding effects are substantial.

“Many SMEs fail within the first two years is because they do not have a business plan, they lack the ability to manage cash flow, and lack of management experience,” he said.

He highlighted that SMEs in PNG often relied on financial support from family and friends.

He added that many business owners have not planned correctly.

“Costly trial and error in the use of capital often results in business failures,” Sam said.