Major Finance Management Challenges Faced by SMEs

Small Business Financial Management

Table of content

44% of SMEs complained spending significant time (an average of 1446 hours) on financial operations and repetitive tasks – Economic Times

There are innumerable challenges faced by SMEs amongst which finance management tops the list. Be it maintaining accurate reconciliation reports or juggling between various finance management platforms, these issues obstruct business functions and hence their success. For example – not having an eye on business spends causes overspending and topples the business budget. Such mismanagement of business finances eventually leads to ugly situations such as a lack of funds when required. Let us discuss some top finance management challenges faced by SMEs.

82% of Business Failure is Due to Poor Cash Management – Small Business Trends

1) Improper cash management

Just like proper cash management keeps a business afloat, an improper one can sink it. Most startups and SMEs suffer due to improper cash management. For example, SMEs tend to overlook their overhead costs due to a plethora of daily engagements with ad-hoc activities and this surely creates cashflow problems. If expenses such as employee travel costs for client meetings, to office supplies are not under budget, they cut a major part of business profits for compensation.

2) Software integration issues

SMEs juggle between different platforms to manage various functions such as accepting customer payments, making timely payouts to vendors, tracking business expenses, etc. Here, they often explore new software for the best results. At such times, integration and synchronization become an issue as they hold back most of the business’ time and efforts. One of the major concerns in this realm is manual data entry while ensuring accuracy. This kind of ambiguous data often results in incorrect report generation, followed by incorrect financial decisions.

3) Restricted online presence

70-80% of potential customers could be lost to businesses without a website – Review

In the list of financial problems faced by small businesses, limited online exposure could be a huge drawback. Online business presence under the relevant product/service category is vital for their growth. If a business is not registered online, its exposure to potential customers will be limited and hence will limit its growth mainly in terms of revenue.

4) Decentralised setup

Small businesses use different tools for managing different financial needs such as supervising team expenses, processing bulk payouts, taking care of reimbursements, etc. Such a decentralized setup consumes a lot of unnecessary time and effort when it comes to tracking finances. For example, compiling reports from different setups is pretty complicated compared to having all the data compiled on one dashboard. It takes away excessive time and cost which can be otherwise used for productive activities

5) Compliance issues

Compliance issues are the ones that if not taken care of, doom the business. Not following necessary regulatory compliances lead to reputational damage, heavy penalties, and lawsuits. For example, the GST Council with its latest development has stated that e-Invoicing is mandatory for businesses with an aggregate turnover of over ₹10 Cr. However, most small businesses lack adequate awareness around their applicability. Therefore, SMEs should prioritize understanding and adhere to regulatory compliances.

6) Complex invoicing

Small businesses often rely on manual resources for managing tedious tasks such as invoicing. There is little segregation of duties in SMEs and so employees end up wearing many hats. Such a working style OPENs room for possible errors in the invoicing process. Wrong entries and missing out on data are instances that welcome further inconvenience. Incorrect and incomplete invoices make businesses lack a record of payments completed and due. This leads to chaos in recordkeeping and providing proof during audits.

Here’s how SMEs can leverage OPEN to overcome these challenges 

OPEN Tally+ 

As a business owner, if one is already using Tally for accounting purposes such as making payouts and collections, here is something to make the experience better. By syncing Tally with OPEN, businesses can not only initiate payouts and collections but also reconcile payments and file GSTR-1. This plugin allows easy upload of all the contacts, stock items, ledgers, and vouchers in Tally and sync with OPEN dashboard and vice versa in minutes. OPEN also makes reconciliation a cakewalk with just a single click.

Google My Business 

Google has easily maintained its top spot as the most popular search engine in the world, holding over 75% of the search market share – Smart Insights

OPEN helps businesses to establish a strong online presence through Google My Business. It has activated an integrated location API that helps its customers get their listing completed within 48 hours which otherwise takes 21 days. Moreover, there is a huge sigh of relief in terms of paperwork as OPEN’s customers already have most of the documents verified and ready, 

Payment Gateway

OPEN also provides a seamless payment gateway that can be easily integrated into websites and apps and eliminate payment gateway challenges faced by SMEssuch as cart abandonment. OPEN’s payment gateway offers more than 200 payment options.

Checkout Optimization Can Increase Conversions by 35.62 Percent – Drip

Moreover, with OPEN you can drastically reduce the scope of PCIDSS compliances as we take care of the end-to-end security of the integration.

It is vital for SMEs to manage their finances in the best form to take better financial decisions and for better business growth. This is possible only with error-free and easy invoicing, financial reports, data collection, and compliance adherence. 

Eliminate financial challenges faced by SMEs with OPEN

OPEN has received RBI’s in-principle approval for an aggregator license and has completed RBI’s cross-border payment regulatory sandbox. In addition to this, OPEN is also PCIDSS compliant which makes it one of the most secure platforms for businesses to streamline their financial management. To know more about what OPEN offers for small businesses, explore OPEN App Store.

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