Skip to main content

The New SME Thresholds in Ghana: A Step Forward for Businesses, But What Does It Mean for Audit Firms?



On January 22, 2025, Ghana introduced new thresholds for Small and Medium-sized Enterprises (SMEs) under the Companies Act, 2019 (Act 992). These thresholds, which define revenue and asset limits for small, medium, and large companies, mark a significant shift in the regulatory landscape. Designed to simplify compliance and encourage business formalization, the changes are a welcome development for entrepreneurs and smaller businesses. However, they also carry implications for audit firms and the broader economy.

Historically, the definition of SMEs in Ghana has been a contentious issue, especially in the context of applying the International Financial Reporting Standard (IFRS) for SMEs. The ambiguity surrounding SME classifications often led to inconsistencies in reporting and confusion about regulatory obligations. Compounding these challenges was the requirement for micro-entities to file audited financial statements, which imposed substantial administrative and financial burdens on businesses with limited resources. These challenges frequently diverted the focus of small businesses away from growth and innovation.

With these new thresholds, Ghana seeks to address these longstanding issues while aligning its regulatory framework with the realities of its economic environment. This article explores the reasonableness of the thresholds, their potential to enhance the ease of doing business, their impact on audit revenues, and their alignment with global standards.

Reasonableness of Ghana’s SME Thresholds

JurisdictionRevenue (Local)Revenue (USD)Employees
European Union€40 million$44 millionUp to 250
UAE - Trading SectorAED 100-250 million$27-68 million51-200
UAE - Manufacturing SectorAED 50-250 million$14-68 million101-250
UAE - Services SectorAED 50-200 million$14-54 million51-200
South Africa - ManufacturingZAR 51 million$2.65 millionUp to 200
Ghana - SmallGHS 0-500,000$0-33,450Variable
Ghana - MediumGHS 500,001-10,000,000$33,450-669,000Variable
Ghana - LargeAbove GHS 10,000,000Above $669,000Variable

Ghana’s thresholds are modest compared to more developed economies like the European Union or UAE but reflect the realities of its economic environment. Ghana’s GDP and market size are much smaller than those of the EU or UAE. For instance, the medium-sized cap of GHS 10 million ($669,000) is significantly lower than the $44 million cap in the EU, ensuring the classification remains relevant to local businesses.

These thresholds allow businesses to grow without being subjected to excessive compliance costs prematurely. By exempting small companies from full audits, resources are freed up for operational and strategic expansion. The thresholds incentivize informal businesses to register formally, enabling them to benefit from exemptions and simplified compliance requirements. Furthermore, they ensure that businesses can dedicate their resources to growth and innovation rather than being bogged down by regulatory hurdles.

Unlike the UAE, Ghana applies uniform thresholds across industries, making the framework simpler to understand and implement. However, this sector-agnostic approach may overlook the unique challenges faced by specific industries such as agriculture or retail. For instance, the agricultural sector’s seasonal nature and dependence on external factors like weather may necessitate tailored thresholds or exemptions. Similarly, high-turnover but low-margin sectors such as retail might face challenges in meeting the classification standards.

Ghana’s focus on revenue and asset limits as classification criteria is pragmatic, but there could be room to include additional factors, such as the number of employees or regional economic conditions, to make the framework more inclusive and adaptable.

 
Impact on the Ease of Doing Business

The thresholds enhance Ghana’s ease of doing business ranking by lowering compliance barriers for small companies, allowing entrepreneurs to focus on growth. Reduced requirements for small companies simplify compliance and make it easier to operate a business, enabling them to scale operations rather than dedicating resources to regulatory demands. This move aligns with Ghana’s broader goals of fostering a vibrant entrepreneurial ecosystem and attracting foreign investments.

By providing clear and transparent classifications, the thresholds reduce the complexity of compliance. However, the absence of employee-specific thresholds may create inconsistencies, particularly in labor-intensive industries. For example, a small agricultural firm with relatively high revenues but a large workforce may face disproportionate compliance demands compared to a capital-intensive company with fewer employees but similar revenues.

Medium-sized businesses may also still find audit compliance costly relative to their resources, potentially limiting the full benefits of the new framework. To address this, the government could consider offering subsidies or incentives for audit compliance or simplifying the requirements further for businesses at the lower end of the medium classification.

Moreover, the simplified compliance requirements are likely to attract informal businesses to register formally, contributing to Ghana’s economic formalization goals. However, sustained efforts in public awareness and education will be critical to ensure that businesses understand the benefits of formalization and the implications of the new thresholds.

Impact on Audit Revenues

The new thresholds reduce audit revenues from small companies, as these businesses now require review engagements rather than full audits. This results in a narrower scope of work and lower fees for audit firms. Medium-sized companies also benefit from simplified reporting, which may further reduce potential audit fees.

However, there are significant opportunities for audit firms. Diversifying service offerings to include advisory and consulting services, such as internal audits, compliance training, tax advisory, and business strategy consulting, could offset revenue losses. These services are increasingly in demand as businesses navigate complex regulatory environments and seek to optimize their operations.

Review engagements for small companies still provide a consistent revenue stream, even if the fees are lower. Furthermore, as informal businesses register to formalize operations, audit firms could gain new clients over time, creating long-term growth opportunities. The shift also allows audit firms to allocate their resources more efficiently, focusing on high-value clients and advisory roles rather than routine audits for small businesses.

The new thresholds may also encourage audit firms to develop expertise in serving specific sectors or industries. For instance, firms could specialize in agricultural compliance, manufacturing processes, or technology startups, creating niche markets that provide sustainable revenue streams.

Impact on Businesses in Ghana

The thresholds reduce compliance costs for small companies, which are exempted from full statutory audits. This significantly lowers the administrative and financial burden, especially for businesses with limited resources. By defining thresholds in terms of revenue, businesses can easily understand their classification and compliance obligations. This fosters increased business formalization as small businesses are encouraged to register to take advantage of reduced compliance requirements.

The removal of the requirement for full audits enables small businesses to allocate resources toward growth-oriented activities such as marketing, product development, and capacity building. Additionally, the simplification of compliance processes reduces the need for specialized accounting expertise, which can be a challenge for small enterprises with limited budgets.

Despite these benefits, medium-sized businesses may still face challenges with affordability and infrastructure to comply with audit requirements. For example, businesses in rural areas or underserved regions may lack access to qualified auditors or face higher costs due to logistical challenges. Addressing these gaps through targeted support programs, such as subsidized audit services or capacity-building initiatives, could enhance the overall effectiveness of the thresholds.

Additionally, the lack of sector-specific thresholds could result in one-size-fits-all regulations that may not align with the needs of all industries. Policymakers could consider periodic reviews and consultations with industry stakeholders to ensure that the framework remains relevant and equitable.

Conclusion

Ghana’s new SME thresholds are a well-considered step toward promoting a business-friendly environment. They reflect the realities of the Ghanaian economy, offering much-needed relief to small businesses while creating a pathway for medium and large companies to contribute to the formal economy. For audit firms, the changes represent both challenges and opportunities. While exemptions for small companies might reduce revenue from audits, the growth of medium-sized enterprises and the potential for advisory services could offset these losses in the long run.

Over time, the formalization of businesses and increased clarity in compliance requirements will strengthen Ghana’s business environment. Periodic reviews of these thresholds will be crucial to ensure they remain relevant as Ghana’s economy grows. By fostering a transparent, fair, and business-friendly framework, these measures have the potential to drive entrepreneurship, investment, and economic growth in Ghana.

Moreover, the new thresholds set a precedent for other developing economies seeking to balance regulatory compliance with business growth. Ghana’s approach demonstrates how tailored policies can create a supportive environment for businesses while maintaining accountability and transparency.

Author’s Note: This comparative analysis provides insights into how Ghana’s thresholds align with global practices and local realities. Feedback is welcome as we explore the broader implications of this landmark policy change.





Labels

Labels:

Comments

Post a Comment

Popular Post

USAID is Finally "Dead": What’s the Implication for Africa?

This article is a follow-up to my previous piece,  Trump and Musk’s America: A Billionaire-Led Revolution and Africa’s Defining Moment , where I explored the shifting dynamics of American leadership and its impact on Africa. With the increasing privatization of global influence and the decline of traditional institutions like USAID, Africa faces a critical turning point. For decades, the United States Agency for International Development (USAID) has been a dominant force in global development, particularly in Africa. Through billions of dollars in aid, humanitarian assistance, and economic development programs, USAID has played a key role in shaping policies, funding critical infrastructure, and supporting democracy-building initiatives across the continent. However, with recent shifts in U.S. foreign policy, reduced political will, and global financial constraints, the agency is experiencing a significant decline. But what does the "death" of USAID really mean for Africa? Th...
Post a Comment
Read more

The Impossible Revival? Why Andersen Consulting’s Comeback Faces Unprecedented Challenges in Today’s Consulting Landscape

The revival of Andersen Consulting under the auspices of Andersen Global has reignited debates about the viability of resurrecting a brand that once epitomized excellence in consulting. As reported by the  Financial Times  (FT), Andersen Global is strategically leveraging the historical reputation of Andersen Consulting to re-enter a transformed market dominated by firms like Accenture, McKinsey, Deloitte, and Boston Consulting Group (BCG). However, a deeper analysis reveals significant challenges in reclaiming leadership in the consulting industry. From its lack of differentiation to an unproven leadership team and a legacy of ethical controversies, Andersen Consulting’s revival faces an uphill battle. THE RISE, FALL, AND LEGACY OF ANDERSEN CONSULTING Arthur Andersen’s downfall stemmed from its complicity in the Enron accounting scandal, one of the largest corporate frauds in history. Andersen’s auditors were found to have knowingly approved misleading financial statements, l...
Post a Comment
Read more

Beyond Double-Entry: Blockchain and the Evolution of Accounting

How blockchain technology is reshaping transparency, efficiency, and trust in the accounting profession. Accounting at a Crossroads For centuries, double-entry bookkeeping has been the foundation of modern accounting. First developed in the 15th century by Luca Pacioli, this method revolutionized financial recordkeeping by introducing a system of checks and balances. Yet, even this historic innovation is not immune to the pressures of the digital age. Enter blockchain technology—a disruptive force reshaping how we think about trust, accuracy, and transparency in financial transactions. Much like double-entry bookkeeping transformed accounting, blockchain introduces a paradigm shift: triple-entry accounting. This system incorporates blockchain’s immutable ledger as a single source of truth, enabling a new level of accountability and efficiency. This article explores how blockchain technology is driving the evolution of accounting, the challenges it poses, and how accountants can ...
Post a Comment
Read more

Trump and Musk’s America: A Billionaire-Led Revolution and Africa’s Defining Moment

Introduction: The Moment Africa Has Been Waiting For Africa is at a turning point. For decades, foreign powers have exploited the continent’s vast natural resources while African nations remained dependent on foreign aid, imports, and external control. However, for the first time in modern history, all global superpowers are too distracted to focus on Africa. The United States, under Donald Trump, is focused on domestic economic protectionism, reducing foreign aid, and bringing manufacturing back home. With Elon Musk reshaping key industries from energy to technology America’s shift towards self-reliance is accelerating. Europe is struggling with economic recession, rising immigration crises, and internal political instability. China, once Africa’s dominant economic partner, is battling economic slowdowns and trade conflicts with the West. Russia is fully engaged in war, prioritizing military spending over global economic expansion. Meanwhile, some African nations especially in Francop...
Post a Comment
Read more

The PwC Layoffs and What They Signal for Careers at the Big Four: Trends, Triggers, and a Wake-Up Call for Early Professionals

  In early May 2025, PwC confirmed the layoff of approximately 1,500 U.S. employees, representing about 2% of its domestic workforce. While the Big Four firm stressed that this was a difficult but necessary decision, the move has sparked wider concerns within the accounting and professional services industry. For young professionals and aspiring accountants, this moment is more than a headline—it's a warning signal. This article explores the rationale behind the layoffs, the core causes driving the trend, the demographics of those impacted, and why Deloitte, KPMG, and EY are likely to follow suit before the year ends. Most importantly, it provides practical advice to those pursuing careers within the Big Four in this rapidly evolving landscape. Understanding the Rationale PwC attributed the decision to historically low levels of attrition and strategic workforce realignment. In essence, not enough people were leaving on their own, leading to staffing levels that outpaced actual ...
Post a Comment
Read more

The CPA Paradox: Oversupply in Africa and Unmet Demand in America

The Certified Public Accountant (CPA) and Chartered Accountant (CA) designations represent globally respected credentials in the accounting profession, signifying expertise in financial management, auditing, and taxation. These certifications are governed by Professional Accounting Organizations (PAOs), which are members of umbrella bodies such as the International Federation of Accountants (IFAC) and the Accountancy Bodies in West Africa (ABWA) under the African Union (AU). “The U.S. has seen a 30% decline in CPA exam candidates over the past decade, contributing to over 40,000 unfilled accounting roles.” “In Nigeria, over 50,000 CPAs are certified annually, yet only 20% find roles matching their qualifications.” This article examines the striking paradox of CPA/CA oversupply in Africa and unmet demand in the United States. It also explores the critical roles played by IFAC, ABWA, and other regional and international bodies like the AU and European Union (EU) in harmonizing accounting...
Post a Comment
Read more

TRANSITIONING FROM ISQC 1 TO ISQM 1: A PRACTICAL GUIDE FOR SMP’s

This article follows up on my previous piece,  “Small Firm, Big Standards: Cracking the Code of ISQM 1 for Small and Medium Practices (SMPs).”  In that article, I explored practical strategies for implementing the International Standard on Quality Management 1 (ISQM 1) in SMPs. Today, I’ll address a specific challenge many practitioners have asked about: how to transition effectively from the International Standard on Quality Control 1 (ISQC 1) to ISQM 1. The move from ISQC 1 to ISQM 1 represents a major shift from a compliance-based framework to a proactive, risk-based system of quality management. While this transition may seem daunting, it is an opportunity for SMPs to strengthen their quality processes, enhance efficiency, and stay ahead in an increasingly complex regulatory environment. In this article, I’ll outline actionable steps to help SMPs make the upgrade to ISQM 1 seamless and manageable, creating a tailored system of quality management that aligns with the new s...
Post a Comment
Read more