Smart Business Seminar on 'Emerging Tools for SME Sustainability in the Post-Covid World'

The Micro, small and medium enterprises (MSMEs) can reap huge benefits from automation and digital technologies in this rapidly digitizing world. Technology not only helps to reach potential customers, but it also enables smoothen businesses and brings transparency, efficiency and helps in cost saving, says panellists at a webinar organised jointly by The Madras Chamber of Commerce & Industry with Business Standard.

Speaking at the webinar on 'Emerging Tools for SME Sustainability in the Post-Covid World', K.E. Raghunathan, Convenor, Consortium of Indian Associations classified the issues broadly into S – for Sales and Marketing, M - for Materials and Money and E – for Employment.

He said Sales and Marketing have necessitated the MSEs to depend more on digital platforms and tools as henceforth physical meetings and interactions will be minimal and access to social media platforms, digital technology etc will be more required. Without a website/e-commerce platforms, online sales, social media marketing and mob app, the MSEs will find it difficult to survive. Material management and sourcing would be going through a change in identifying local manufacturers and sources. Dependence of imported components and raw materials will be difficult to depend on. Many enterprises would look at downward integration. 

He added every employee will be required to do multi-tasking and productivity will be the need of the hour to measure salary and incentives. Work from home will be visible with at least over 25% of staff in engineering industries henceforth thereby reducing costs. In order to overcome these challenges, he proposed the need to MODI-fy. He explained MODI-fy further as M – for Modernisation, O – for Optimisation, D – for Digitalisation and I – for Innovation. "SMEs will not be able to rebound or survive unless they MODI-fy themselves and requested Government and Banks to fund them for this transformation," said Raghunathan.

Ajay Srinivasan, Director, CRISIL Research, said only 10% of the 63 million MSMEs in the country have accessed formal credit in any form or shape. Financiers are also expanding their presence in this segment at a tepid pace. The number of active loan accounts of MSMEs has expanded by just 4% CAGR in the last three years. In contrast, the number of current accounts is much higher, clearly pointing out to gaps in the availability of credit for MSMEs. Besides the operational costs aspect, two of the main reasons for this gap are information asymmetry, wherein the borrower has a much better sense of the business and cash flows compared to lenders, and the lack of transparency in the operations of MSMEs.

Covid-19 and the resultant fast-tracking of technology and digital adoption provides a great opportunity for MSMEs to make their businesses more tech-savvy, organised, transparent and scalable. This will however entail a change in mindset. For example, MSMEs in the retail segment need to be much more open towards accepting digital payments; otherwise, they risk losing out business to competitors. Higher digital payments would also create a trail of records, which can be used by lenders to more accurately track cash inflows and outflows and creditworthiness. Covid-19 also serves as a grim reminder to MSMEs on the importance of financial discipline. Planning monthly cash flows in a scientific manner, assessing the impact of seasonality on business, learning from past experiences, and creating a buffer for unforeseen emergencies are all critical for MSMEs.

While presenting various use cases including on how the producers of Bhavani Jamakallam have used digital effectively to reach out to the customers and grow their business, R Vittal Raj, partner at Kumar & Raj Chartered Accountants, emphasised on the potential of the digital being undermined by the MSME sector. He stressed on the urgency of MSMEs to move away from old-world mindset, he said, mobile-centric SMEs are the future that empowers them with right data and tools in taking right business decisions. He said SMEs that have taken the digital leap have discovered disruptive ways to connect and engage with the customers and reach global markets. "If you aspire for scale and growth then the secret lies in digital. MSME owners first need to start with transforming their digital agnostic mindset and they too are bound to find growth knocking at their doors," said Vittal. Besides, he also reiterated on ramping up the poor industry-academia in India, which he said could do wonders for our economy.