Monday 20 / May / 2024
Muscat: Small and Medium-sized Enterprises (SMEs) make up approximately 90% of all businesses worldwide, representing more than 50% of employment, according to the World Bank. In emerging economies, SMEs contribute up to 40% of a country’s GDP and with an estimated 600 million jobs needed by 2030 to absorb the growing global workforce, SMEs have a crucial role to play in economic growth and employment in both developed and developing countries around the globe.
Common challenges are faced by SMEs in managing finances and staying competitive – such as limited resources, cashflow management, stiff competition and the harsher effects of any economic uncertainties versus larger organizations – but a lack of financial expertise and limited uptake of technology can quickly become professionally fatal.
The landscape is ever-changing: a World Economic Forum report in December 2022 suggested that two-thirds of SMEs are fighting for survival. And with margins, turnovers and profits anyway usually far smaller than in national and international organizations, with difficulties in securing bank funding not unusual, the need to secure all available advantages must be at the forefront of any successful SME’s thinking. The transformative potential of financial education and technology can clearly be the difference between success and failure.
NAVIGATING THE FINANCIAL LANDSCAPE
Economies of scale dictate that SMEs suffer from comparatively limited access to capital and funding options, a lack of financial expertise and knowledge, and difficulty in effectively managing cashflow and budgeting.
Financial education has a huge role to play in empowering SMEs by enhancing financial literacy and decision-making skills, providing knowledge on financial management principles and practice, and educating SMEs about funding options and investment strategies.
In tandem, SMEs need to keep up with latest technological advancements in their fields to remain competitive. Tech advances can help increase efficiency and productivity, use data to drive decisions, boost communication and collaboration, improve access to global markets and evolve customer experiences. This also ties in with financial education, helping to maintain efficient financial management with the use of cloud-based accounting software, and the latest payment gateways and online transaction technology.
DO THE MATH
Financial education has let down many SMEs in the past – improved financial literacy and decision-making bring many benefits for SMEs, from day-to-day operations through to planning for the future and potential expansions. Understanding financial statements and key financial indicators is a vital skill that will feed into making informed decisions on subjects such as pricing, cost management and investments, as well as mitigating financial risks and identifying growth opportunities.
SMEs rely on effective cashflow management and budgeting to stay afloat. Having the financial nous and resources to develop cashflow forecasting and monitoring systems will provide an effective early warning system, while optimizing working capital and managing expenses efficiently helps to keep things ticking over economically.
Understanding funding options and strategies for capital raising is a necessary facet, while using financial technology platforms for payment processing and invoicing, as well as knowing how to access business loans, grants and government support programs, all form part of the bigger picture.
THE TECH FOR THE TASK
Harnessing new technology for SMEs has arguably never been more important, as the Fourth Industrial Revolution gathers pace, powered by emerging technologies such as blockchain, the Internet of Things, AI and machine learning.
Cloud computing and remote collaboration tools are vital, while savvy use of digital marketing and e-commerce platforms is opening countless possibilities to improve reach and gain customers. Behind the scenes, the latest financial management software and mobile banking applications have made overseeing business banking and finances easy than ever.
Digital tools can streamline SMEs’ financial processes. By automating book keeping and accounting tasks and simplifying payroll and tax management, digital tools can also free up more time for the day-to-day running of the company, as well as unlocking the multiple benefits of improved financial reporting and analysis – particularly useful when pitching for funding or new business, as well as identifying areas to target investment or make savings.
Customer relationship management can be enhanced by using the latest technology – chatbots, for example, can reduce customer waiting times – while informed decision-making will be vastly improved by leveraging data analytics, which can likewise improve a raft of functions across a company, from sales and aftersales through to investment possibilities.
COLLABORATION AND SUPPORT
The importance of partnerships between financial institutions and SMEs cannot be underestimated, with banks and other organizations that provide tailored financial products and services for SMEs, powered by cutting-edge technologies, representing highly prized collaborators. Enrolling in financial mentoring and advisory programs are another way in which businesses can maintain relationships that provide ongoing positive effects on their output.
THE WAY FORWARD
It is clear, then, that SMEs must prioritize financial education and embrace new technology to allow them to reap the maximum benefits for both their businesses and the wider economy – but they cannot achieve this alone. SMEs should seek support and resources available for their growth wherever possible and not be afraid to ask for help, because without being financially educated and deploying relevant new technology, survival rates for SMEs could continue to be unnecessarily harsh.
