India MSME Summit 2022: How MSMEs can better manage their working capital

MSMEs run into major problems due to a lack of working capital, and on the third day of the India MSME Summit 2022, SMBStory spoke to industry stakeholders to find solutions for this very problem.

The panel—including Meghna Suryakumar (CEO, Crediwatch), Amit Kumar (Founder, MSMEx), Ravi Modani (Founder, 121 Finance), and Amit Mundra (Country Manager, Buhl Data Services)—uncovered ways for MSMEs to ensure capital smoothly flows into the business by adopting technology. 

It also highlighted various tools that can lessen MSME’s operational costs, giving them cash in hand for smooth business operations. 

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Key takeaways: 

More digital adoption, fewer cash problems: Panellists said that more digital adoption would cause fewer cash problems for MSMEs. The digital inclusion in accounting, inventory planning, supply chain, and administrative processes would lessen the monetary cost and time and would streamline business processes for MSMEs. 

Find the difference between working capital and cash flow: MSMEs find it hard to differentiate between working capital and cash flow. They don’t identify their needs for short or long-term gains and mix the long-term and short-term loans. Moreover, there is a need to address the mismanagement of short-term loans among MSMEs. 

Borrow only when you need: MSMEs should be smart while borrowing. For example, if an MSME needs capital for the short term, why should they take loans for years and repay huge interest? Instead, they should look for other financing options and stop paying higher interest.  

Learn new ways of borrowing: MSMEs need to learn and develop a mindset for new ways of borrowing like factoring, purchase financing, revenue and marketing financing, and more. It’s about time they leave the traditional way and follow the new normal of doing business. 

Identify skills to do a business: Not every business is meant for everyone, thus, MSME entrepreneurs must identify their skills and work on their business plans. Learning, skilling, and training will pave the way for MSMEs to solve their business problems.