How SMEs are reducing their business costs and increasing efficiency with technology
Small businesses are established with a very frugal capital base and usually have minimal working capital finance. While an SME Entrepreneur has to worry about acquiring customers and reaching them efficiently, , it is more important to save and reduce the cost structure. This is where technology comes to the rescue. To keep pace with the changing times, new-age tech players and many startups are joining the fray with solutions which are beneficial and affordable for small businesses.
These solutions can help reduce costs, thus making them competitive not only in the domestic markets but also globally.
Here are seven ways that SMEs can reduce business costs and become more profitable.
Marketplace (for purchase and sales of goods and services)
There was a time when one of the biggest hurdles for an SME business was to reach out to the cheapest raw material supplier or make sure their goods/services reach beyond their local area. B2B ecommerce platforms such as Udaan, Amazon Small Business, and Amazon Seller Services along with many similar platforms, have extended the reach for SMEs to practically every nook and corner of the country. Not only do they provide them with platforms to showcase their products but also help them with logistics and warehousing as an add-on. All this makes the entire sale and purchase function not only efficient but also cost effective as economies of scale come into play, which were earlier present just for large players.
Most SMEs used to maintain their accounting in physical books and at times, it used to get very difficult for them or for their lenders to decipher the true value of the business, and also comprehend the receivables and payables. Now, with byte-sized accounting solutions made available online by players such as Tally, ZOHO, and even SAP have not only made the entire accounting a hassle-free process, but also very affordable. Additionally, with GST and Income Tax filing available as a plug-in for these apps, it makes accounting a fun activity, which can be done on the go by the SME promoter.
Neobank and payment solutions
The biggest leap in the SME world has been digitisation of payment solutions and related infrastructure. This has happened across the globe, and now making and accepting payments has become quite a convenient and intuitive process, especially for the small businesses.Today, India can boast of having the world’s most advanced payment stack — whether it's UPI, NPCI-supported NACH, IMPS, or even payment gateways.
These integrate into various applications used by the SMEs to transact seamlessly. Further, with the payment banks and now, neobanks — which are branchless and contactless — entering the fray, banking and payments is now within reach of any small business. The entire digital journey not only makes them fast but also very affordable as compared to the old-fashioned PSU banks or even large private banks with hidden charges.
Another sector which has seen huge innovation is the lending space, which is led by the new-age fintech players. The amount of data such as that from ecommerce sites, bureaus, payment gateways, accounting, social media, telecoms, and public data such as GST etc, makes the entire underwriting process much more analytical and AI driven rather than person dependent. This also makes the SME loans much faster and more affordable as the need for collateral-backed lending has been done away with. These fintech lenders are agile and keep coming with newer ways to reach and underwrite the small businesses and self-employed professionals.
Most of the SME entrepreneurs also double up as HR managers, and usually manage their workforce on their own using some primitive methods. With the entireHR function digitised and available on apps, it has not only transformed the entire process but also allows SMEs to function without spending additionally on HR personnel, consultants or even HR solutions.
Firms like Kredily, SumHR, Keka etc, provide affordable solutions which are available across platforms and practically cover all HR functions.
The exorbitant costs of office productivity suites force small businesses to buy the pirated copies and infringe on the copyright laws. However, a lot has changed in this space and office suites are no longer just limited to Word, Excel, and PowerPoint. They have got extended to cloud storage drives, video conferencing tools, e-mail clients etc. All these solutions now also come with easy payment options and a variety of combinations to choose from. Additionally, they are completely secure and upgradable. These solutions improve the productivity of the SMEs and makes them equally efficient and competitive to the much affluent and larger corporates. Many businesses quickly adopted some of these solutions during the pandemic.
Another innovation which has happened, is in the space of training. Earlier, any kind of technical or non-technical courses would involve people taking time out of their working life and opting for courses in a university campus or institutions of repute. Now, most of these courses are available online and accessible to all, and even on mobile devices. This has opened a great opportunity to the promoters and employees of SME businesses, who can not only continue their day jobs but also complete these courses which helps them upskill. There is also immense savings on the travel, lodging and boarding costs, which one must incur otherwise.
So, all in all, we can note that technology and innovation in these spaces have made life much easier for SMEs.
Edited by Kanishk Singh
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)Navin Saini