The 4 smart financial decisions SMBs must adopt to rule the new normal

From adoption of technology to managing costs to taking on credit for expansion, a look at how SMBs need to approach the post-COVID-19 situation and propel India’s growth story forward
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As India gradually re-opens its economy from a more than two-month nationwide lockdown, it’s time for small and medium businesses to ‘unlock’ their significant potential and propel the country’s growth story forward in the new normal.

And the role of the micro, small and medium enterprises (MSMEs) sector will be crucial in achieving this goal.

To put things in perspective, the MSME sector, as per the Confederation of Indian Industry (CII), is ‘the backbone of the national economic structure and has unremittingly acted as the bulwark for the Indian economy.’

The industry body says around 63.4 million such units exist in the country where MSMEs contribute around 6.11 percent of the manufacturing GDP and 24.63 percent of the GDP from services activities. The sector provides employment to around 120 million people and contributes to around 45 percent of the overall exports from India.

But the sector needs to adopt strategic changes to emerge from the ashes by adopting smarter financial decisions to weather the economic storm and thrive in a post-COVID-19 world.

A ‘Tech’tonic shift

The ongoing healthcare crisis has brought to the fore the need for businesses to continue their activities by working out of their homes or remote locations rather than gathering in a crowded office space. It is important for SMBs to focus more on technology and digitisation to ensure workplace activities to continue business as usual.

“The next-gen workers want their tech experience to be seamless. Outdated technology kills morale, stifles productivity and racks up needless costs,” Vikram Mulye, Product Head – SMB, Lenovo tells YourStory.

Along with these, businesses and industries want solutions that enable remote and flexible working and customers are looking for reliable devices which are sleek and stylish at the same time.

“Our new SMB device, ThinkBook, powered by the latest 10th Gen Intel core processors, which was launched in the latter part of 2019, fits this bill perfectly. ThinkBook is a business grade device with features like fingerprint power button, ThinkShutter, hot keys for video calls etc. and is sleek and stylish with its mineral grey finish,” says Vikram

Moreover, smart work bundles which include a set of devices and accessories such as monitors, headsets, keyboards, and mice enable customers to be productive, Vikram explains.

SMBs can also look at this situation to empower themselves through next-gen technology features since slow moving inventory is the biggest dead cash for SMBs and it is important to remove them from business lines.

Prune costs and improve cash flows

Given the current economic situation and the uncertainty around a return to complete normalcy in the near term, companies need to look at ways to cut costs and stay afloat.

First, they must identify ways to keep the business sustainable and conserve its capital for business-critical functions, along with having the least impact on cash flow. SMBs can also adopt more focused variable cost models to bring in supply and demand clarity, and focus on clients by using specialised services of tech majors such as Lenovo.

“Lenovo Device as a Service (DaaS) takes care of managing the entire device lifecycle of a business, letting the SMBs stay focused and dedicated to their clients. Companies can also free up internal resources, align their spending with revenues and free up cash flow,” Vikram says.

"Businesses can go for choosing capex over opex with our Device as a Service model. In the cash purchase model, they have the option of either choosing a fixed cost model, incentive model or do a one time purchase. They can also claim tax for their purchase.”.

Debt management

While the COVID-19-led lockdown dried up revenues and disrupted several entities’ growth plans as they were forced to dip into contingency plans to survive, SMBs can also turn towards debt to boost its liquidity position and implement key business plans.

But these proceeds must be used to ramp-up the technology infrastructure in your company to thrive in the new normal. And there are entities in the tech and lending space that can offer cheap, tailor-made loans or financing options to implement big-ticket purchases.

For instance, Lenovo Financial Services has special offerings such as lease up finance schemes, rental relief programs, a short-term lease and a short-term loan.

Structured data

Given the vast majority of unorganised industries/individuals in the MSME sector, it is important to have the right data framework to help companies and governments target the sector in a more efficient manner. Similarly, more digital information and footprint will help companies improve sales as customers look towards online presence to gauge a company’s credibility. Investing in such tech and design upgradation will go a long way.

In conclusion

SMBs must dynamically transform themselves to be the big drivers of India’s growth story and, in turn, continue to be one among the most job-creating segments in the country. SMBs are an absolute necessity for India’s economy and it cannot afford a collapse of this ecosystem. But companies need to dynamically transform themselves, adopt technologies rapidly and streamline processes and its books to help be one of the leading drivers of India’s growth story and, in turn, create crores of jobs.