The PCA discovered that the most crucialobstacle for business start-up of new SMEs in NWP is largely internal to thefirm (Financial issues). Surprisingly, the second most critical obstacle,management, is also an internal factor to the business environment.Small and MediumEnterprises is a vast developing sector and is the mainstay of Sri Lankaneconomy. Startingup a business in Sri Lanka is not a frightening task. Arecent report gathered by the World Bank Group indicates an improvement in SriLanka’s ranking as a potential destination to do , having risen to the 111th spotout of 190 countries in the ‘Doing Business Index’ for the year 2018. Accordingly, thestart-up process in Sri Lanka now features only eight relevant steps, all ofwhich take ten days (on average) to complete.
The first eight steps are: (1) reservinga name; (2) appointing directors and a company secretary; (3) registering withthe Registrar of Companies; (4) giving public notice of incorporation; (5) registeringwith the tax authorities; (6) registering for VAT; (7) payment of stamp duties;and (8) registering with the labor department (World Bank Group, 2018). Most ofthe respondents in the survey (55%) have not obtained their businessregistration under government authorities. This is mainly because they find thatbusiness registration is a costly, time consuming and unimportant activity.
SME owners do not have a plan for theirbusiness. However, they start the business and get stuck at the middle withoutbeing able to grow to the next stage of its life cycle. Hence, most of theenterprises get shut down and do not grow into large scale businesses.
ManySMEs are of first time entrepreneurs, and they do not have sufficient bandwidthin all the functional areas. They are not able to estimate their own short-termand long-term needs accurately with all the uncertainties they encounter. SriLankan SMEs have not made great progress in the past. They still struggle withtapping financial management. In most cases, SMEs are founded by entrepreneurswho are not managers themselves but they struggle to manage them due to thesole fact that they are the founders. Care must be taken often to study,organize, plan and control all activities of business operations. Most SMEsrely more on mental records and therefore, unable to prepare proper orup-to-date financial statements that can be used as evidence of profit and lossearned/occurred and wealth of the business including the working capital.
This problemis even made worse where the entrepreneur, as the founder, manages without therequired managerial skills. Therefore, the studysuggests that it is needed to provide up to date training programs to SMEowners, government SME supporting agencies (such as National EnterpriseDevelopment Authority) should be vigorously marketed to create awareness amongthe public, introduce lower interest rate plans for loans, introduce newtechnology, improve infrastructure facilities and revisit the micro finance accessibility ofSMEs and formulate effective financial management plans through closelymonitoring and supporting SMEs in NWP within their early years from theinception to avoid failures.