It is not simply said that SMEs are the backbone of the Indian economy! There are nearly 43 million GST registered small businesses across India providing jobs to more than 100 million people (40% of India’s workforce), second only to the agriculture sector.
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Every small and medium business owner’s life is overloaded with various business activities – be it sales, accounting, inventory management, or anything. Managing business single-handedly or even with a small team could be quite a challenge.
Let’s look at the common problems faced by SMEs in India
1. There’s competition everywhere!
SMEs deal with tough competition from surrounding local shops on a daily basis. Surviving the competition with tight budgets while pleasing the bargaining customers by bringing their profit-margin to nearly zero can be frustrating for Indian SMEs.
2. Handling cashflow the harder way!
Cashflow is something very few SMEs manage well. Majority of SMEs in India use the old pen & paper method to make cash inflow/outflow entries. This way of manual accounting is not just time-consuming and hard but is prone to errors that can seriously affect their business the negative way.
3. Not getting paid on time!
Most small businesses experience serious trouble in getting paid on time by their customers and with debt recovery. Not all customers pay on time. When a lot of cash is stuck outside, it’s difficult to run business with remaining working capital. This can hamper its growth!
4. Investing too much time on unimportant things!
A lot of business owners spend too much time on things that do not need serious attention. They do not concentrate on their primary role and responsibility as a leader to bring in new customers, sales, etc. Not giving importance to such vital things can cause the company to stop growing and could eventually lead to failure.
5. Planning ahead based on wrong guidance!
Not all are lucky to get the right guidance from the right people in the industry. We get all sorts of advice from family, friends, and relatives. It’s very difficult to decide what to implement and what not to.
6. Not adopting the right technology!
Many times, choosing the right technology decides the success or failure of a business. The best technology helps the small businesses to reduce its cost of operation, improves productivity and brings efficiency, but SMEs fails to cope up with the latest technology due to lack of finance in India.
How Digital Transformation can help SMEs (like you!) solve their problems?
Here are the key reasons why going digital is the one thing that you, as an SME business owner, must plan anytime soon (If you haven’t yet!).
1. Brings convenience to your customers
Customers today expect digital convenience in all their business dealings irrespective of whom they are interacting with. Many prefer digital over other methods, to explore, transact and even pay online. Adopting technology can help you get paid faster.
2. Makes you a better competitor
With the right technology, you can compete not just with your local competitor but with an international one as well. Digital solutions can handle incoming and outgoing traffic at a higher scale – thousands and even millions of transactions. In fact, a Google study says that digitally engaged SMBs grow twice as fast as offline SMBs.
3. Work productivity gets doubled
Managing cash flow becomes easier with digital transformation. What you need will be accessible at the tip of your fingers. It increases workflow efficiency, reduces the need to hire more staff and therefore you can earn higher profits.
4. It gets easier to connect with your customers
Having a digital version of your business data helps you reach, interact & engage with your customers the new, innovative way. You can share the transaction details with your customers via WhatsApp, send payment reminders, send a promotional message to sell better and what not! This is where one should invest time in to grow business and profits.
5. You can make informed decisions
When you’re fully digital, you can get whatever information (Profit/Loss reports, tax reports, etc..) you need about your business in just seconds. You can generate reports on your business that helps you know where you stand financially and otherwise. With such critical data, you can know what products/services you should invest more/less. Truly, this is the only support you need to run your business carefully.
6. Reduces the risk of making errors
And finally, it reduces the risk of errors (and therefore wastage of time & effort) from manual or paper-based processes.
Conclusion
SMEs are considering the digital transformation of their businesses to provide better customer service, reduce errors in intensive manual accounting work and to save time and cost.
Going digital isn’t rocket science anymore and does not require a dedicated IT person. Latest business accounting apps are built in such a way that a person with no accounting knowledge can use it. There are also accounting apps that SMEs could take advantage of with their low budget.
Amaey Anand is a certified accountant with over 10 years of experience in the finance industry. He has worked with various organizations to streamline their petty cash management processes and reduce inefficiencies. He has also written several articles on financial management for leading publications such as Zensuggest and The Wall Street Journal.
