A worrying number of small businesses believe they do not have enough cash reserves to survive another economic downturn, according to a survey titled SMEs: Rebuilding a Foundation for Post-Recovery Growth.

It shows that while most SMEs believed the worst of the past recession, there were an unexpectedly high number of businesses, between 31% and 54% in each country, including those which have seen high growth and were less affected by the global downturn, who felt they did not have adequate cash reserves to survive another financial crisis.

SMEs surveyed says the recession has forced them to become better businesses and if they take on risk, it is only where they can have control. Growing businesses, especially in the more dynamic economies, appear to be facing stiffer competition and rising costs, putting profit margins under pressure.

The study also found that credit is being directed away from working capital towards capacity building investments and is increasingly likely to be secured against personal or business assets, while equity investments are drawn to acquisitions and to financing local or international expansion.

The study also discovered that businesses who hire expert advisers above others have performed better professional advice has given lean SMEs more confidence about their chances of survival, by ensuring that they have fewer urgent financing needs and better access to credit.

The study was done by Forbes Insights in association with the Association of Chartered Certified Accountants (ACCA), Certified General Accountants Association of Canada and the professional body for certified accountants in Italy, CNDCEC (Consiglio Nazionale dei Dottori commercialisti e degli Esperti contabili).

It was based on a survey of more than 1,750 small and medium sized enterprises (SMEs) worldwide, with 30% of the sample micro businesses employing fewer than 10 people.

ACCA Malaysia country head Jennifer Lopez says: “It has been a challenging two years for small businesses around the world but they have emerged, on the whole, somewhat wiser, more in control and cautiously optimistic. However the recovery, such as it is, presents its own unique risks.”

As the research demonstrates, having the tools, the support and the confidence to navigate these risks can make all the difference between continued growth and stagnation for SMEs.

Meanwhile, ACCA's Malaysia Advisory Committee president Datuk Mohd Nasir Ahmad says the SME sector is not out of the woods yet although there are signs of economic recovery.

“We believe it's important to understand the issues faced by this sector and based on the study it's clear there are things to be done by policy-makers, by business advisors, by financial institutions and by the businesses themselves,” he adds.