Challenges That Prevent Smes To Grow And How Can Chartered Accountant Can Help


India has many challenges which has resulted in slow growth of economy. Some of the challenges are

  • Lack of government infrastructure (multiple steps for approval, speed of approval, very old rules, which does suit current times)
  • Poor Physical infrastructure (roads, railways, tele communication, internet communication) and ;
  • Lack of Social infrastructure (gender inequality, gender bias, lack of education in many states and rural areas, lack of industry specific skills).

With new Indian government that has come to power in 2014, having clear mandate and lead by a leader who has dream to take India to next level in world map, India is at cusp from where it can grow at more than 8%+ rate in long term.

To achieve this growth, every organizational, be small or large, will have to contribute and will have to grow at pace far greater than their traditional growth rate. The ‘Push and Pull Effect’ (organizations helping each other) will provide many opportunities for these organizational to grow at higher rate.

Indian Small & Mid Size Enterprises (SME) will gain a lot from this exciting opportunity. But it is very important for SMEs to get ready for the growth. If they don’t prepare themselves for the tremendous opportunity that is in store, they will miss the golden opportunity.

There are many areas where these SMEs will have to focus on. One area where SMEs have put very less focus is Effective Financial Management and good financial discipline.

While SMEs will normally take care of routine accounting requirements, quite often their staff and management both lack the experience needed to meet the challenges of growth.

When a business grows at rapid pace, management is almost always operating with limited resources and one of those is limited financial management expertise and this is not surprising if the owner does not have any financial training.

A SME cannot justify a full-time, suitably qualified Chartered Accountant until it reaches a certain point and so it often continues to utilize the same Chartered Accountant as was necessary when the business was much smaller. Often this Accountant is capable of preparing the necessary compliance referred to above. However, that person often does not have the experience to effectively manage the slightly more complex challenges that growth entail. So it is very important even for chartered Accountants to prepare themselves for the Indian growth story.

Given below are major financial challenges that organizations must overcome as it grows.

  1. Lack of capital

    Lack of capital is often the most critical challenge that a successful SME faces as its very success creates this and it quickly becomes a vicious circle. If SME need capital, they will have to approach financial institutes (investors, banks etc.). For them to make strong case with the investors they will need to have solid financial history and all the historical information should be well documented and easily available.

  2. Lack of Financial Dashboards

    Financial Dashboard provides information about financial health of the organization. It is very important to decide which critical financial parameters to measure, set targets and understand performance of these critical financial parameters over time. Financial Dashboards can provide such information. Without such information, it is very difficult to understand how the organization has performed over time.

  3. Lack of Systems to help in Financial Discipline
  4. SMEs do not use systems which provide information about Regulatory Financial compliance status and easy access to financial documents. This situation will create chaotic situation in high growth organizations as it will be very difficult to retrieve such information when it is required.

It is very important that SMEs start using IT Systems to manage above challenges. Chartered Accountant can help SMEs to take care of above challenges by recommending SMEs to use IT systems from initial stage so that the organizations do not face challenges during the growth phase. If Chartered Accountants have to recommend IT Systems to SMEs, they have to start using IT Systems where they can store all financial communication, information and documentation for these SMEs.

CADashBoard is one such platform which chartered accountants can use.