Community Development Activities for SMEs

Recently, our faculty members conducted community development activities targeted to small and medium enterprises (SMEs) residing in Jabodetabek area. These activities were performed on March and April 2020, using online platforms (Google Classroom and Zoom), due to current circumstances. The main focus of these activities was to help SMEs in preparing their financial reports, using accounting apps that are widely available nowadays. The background that led us to choose this topic is that SMEs are important in supporting a nation’s economy, however, this strategic role of SMEs usually does not come with their ability to maintain their business. The main reason of SMEs’ failure is their lack of ability to manage their finance. A lot of them feel overwhelmed in recording the business transactions, which is the initial step in financial management.

According to the World Trade Organization (WTO), in 2018, SMEs comprised of around 90% of the business population and provide 60-70% of employment. Furthermore, they also account for 55% of GDP in developed countries. Meanwhile, according to Organization for Economic Cooperation and Development (OECD), SMEs provide 45% of employment and 33% of GDP in developing countries. Unfortunately, this crucial role of SMEs is usually does not go in parallel with the sustainability of their business. Based on the data from Small Business Administration USA, 80% of business established from 2005-2017 only succeeded to pass their first year, but only half who managed the fifth year and one-third in tenth year. The business failure is dominated by issues related to financial management. In Indonesia, based on data from Kementerian Koperasi dan UKM (2016), around 98% of business are classified as SMEs and contribute to almost 60% of the nation’s GDP. Approximately 70-80% of SMEs failed due to lack of mentoring/ coaching.

Therefore, as part of an effort to improve SMEs’ awareness on the importance of financial management of their business, we chose to introduce them to some of the simple accounting apps that they can use to manage their business’ transactions. This will lead to the resultant financial reports that can help them in making better decisions for their business, hence improving the chance to sustain their business.

(AL)