Credit and financing for MSMEs: One of the biggest challenges any business faces is sustainable growth. The pace of change in today’s economic landscape poses a risk to the foundation of any cross-industry and cross-industry business. Financial consultants have played a vital role in guiding companies through the uncharted terrain of dynamic markets. This is all the more true for small and medium-sized enterprises. For an industry working with a limited budget, hiring a financial consultant may seem like an extravagance, but it has become important for SMEs to do so for effective financial management.
Lack of sound financial planning and internal accounting is one of the main reasons why SMEs often run out. Irregular accounting also defeats the purpose of long-term expansion. Hiring a Chartered Accountant often serves as a vital support for many SMEs, as CAs will ensure regular tax filing, audits, and reliable insight into your financial health. With their expertise in smart financial management, CAs often help to drive business profitability, control costs, and adapt to changing economic environments.
Best financing option
More often than not, SMEs find it difficult to access working capital. Although there are a range of options available to obtain funds, including bank loans or access to other funding platforms, SMEs are unsure which option is best for them. Their CAs, knowing well the needs of the SME and the options available, will guide it towards the service best suited to the company. Some options such as BizFunds make it even easier for SMEs and advisors with their unique product offering.
Optimal use of funds
After securing the funds required for sustainable operations, the next step is to use available resources wisely. While a business owner may think they know their business well enough to make investment decisions, according to primary research conducted by Power2SME found that the SME actor is the primary decision maker for their business. She/he is the CEO, CFO, CTO, CPO rolled into one, and while juggling all of these roles, barely finds the time to assess multiple scenarios and the likely impact of her/his choice.
In such a scenario, the expertise of a financial consultant can help SMEs with solutions on how to properly allocate their finances. As part of the services, they will outline the taxes a business is required to pay and prioritize important business functions that require immediate investment. Therefore, financial consultants help design an agile finance allocation and management strategy, thereby gradually pushing the business to deliver more value at lower cost.
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Increase net income
Financial advisors can play a key role in increasing a company’s bottom line. With their expertise, they can work to manage the cost of capital by adjusting prices and reducing expenses. With access to company financial data, a consultant can guide SMEs in identifying market challenges and determining solutions for them. Apart from cash flow analysis, they provide essential inputs for other business areas including human resources and productivity, etc. Overall, a financial consultant can act as a catalyst to drive SMEs towards profitability.
Good insurance policies
Running a small and medium-sized business is a daunting task with operational risks, including unforeseen calamities and accidents. They are easily exposed to these possible risks due to underinsurance or lack of insurance. Although SMEs are aware of these solutions, they do not have a thorough understanding of the benefits offered by these policies. Financial advisors can provide the right advice to SMEs in selecting and purchasing the best protection plan available for their insurance needs. With so many players offering a multitude of insurance policies to SMEs today, a financial adviser would be the right person to help them navigate through the type of insurance, the amount of insurance and the different insurance packages. insurance, including property damage, liability, credit education, and personal accident, available.
Coordinate personal and professional finances
Very often, a business owner only focuses on business finances while their personal finances are largely neglected. An experienced financial consultant has the ability to take charge of business finances and personal finances. This timing is very important for investment and tax purposes. Maintaining a good personal credit score is just as important as a good business score in increasing future financing options. Moreover, faced with the scarcity of credit, SMEs generally invest their personal wealth in their businesses, which makes the distinction between personal and business financing more important. A financial advisor will not only keep personal and professional credit score in check, but will also coordinate with accountants and bookkeepers to ensure seamless synchronization between the two.
In today’s fluctuating business environment and the need to address the persistent credit crunch facing the SME sector, well-assessed financial guidance is important, otherwise SMEs may end up walking away from optimal use of available resources. Financial consultants can play a vital role in identifying the short and long term financial goals of SMEs, helping them to dramatically improve their chances of surviving in today’s dynamic market.
(R Narayan is Senior Vice President of FICCI-CMSME and Founder and CEO of Power2SME. Opinions expressed are those of the author.)