Pain Points of SMEs

Finance Service Consultant

Friends, looking to the current scenario of businesses and challenges of SMEs and growing organizations, I am writing an article to touch the general pain points of businessmen.

I will be elaborating on each point on weekly basis by giving the proper solution to address the challenges of business.

Stay connected…

We can categorize the pain points or challenges of growing SMEs practically as under:-

  1. Stake holders’ past experiences, beliefs and mindset

Stake holders’ past experiences, beliefs, and mindset:

The most important thing to be addressed is the partners’ or the owners’ mindset and beliefs. They believe that they know best about their business. Therefore, they are risk-averse and resist any change which does not match their old mentality and past practices. They fear a loss of power and hence are against power delegation. They end up doing most of the tasks themselves.

Accounts, Finance and MIS

“Finance is the blood”

Accounts and Finance are the backbone of any business but unfortunately are not given much attention until everything comes to a standstill. The main challenge is to decide which accounting system needs to be followed, how to maintain and structure the cost system to define and get a realistic picture of the transactions.

The SMEs always cry for proper and systematic cash flow management. Many times they face a challenge in paying their operational costs and taxes in a timely fashion as their cash flows are always tight.

Their poor accounting system leads them to have money in the books of accounts only and not in the bank account. The best example is where the cash flow cycle is undefined. Their finances are a mess and hence they are caught in the vicious circle of liquidity crunch.

A good MIS and dashboard help the stakeholders to take well-defined and timely decisions in the business. The challenge before stakeholders is to get a perfect design of MIS, and an understanding of MIS reports.

Statutory and Legal Compliances

Day by day the number of compliances required is increasing and must be completed within a particular time frame. Initially, the SMEs do not pay much attention to legal and statutory compliances resulting in legal notices and heavy penalties. The high compliance costs act as a major obstacle in the path of SMEs since they are difficult to afford and there is no escaping from them.

IT, Operations and Controls:-

Since the businesses now are more diversified and complex SMEs need a solid and full-proof IT and operating system in place. Selection of the best ERP system is the real challenge in front of any SME. SMEs suffer due to a lack of knowledge of what system needs to be purchased and installed as per the need of the business. They keep on investing in different systems resulting in loss of time, money, and opportunity. They have no backup planning in case of a cyberattack, and hence find it challenging to run the show.

Sales, Marketing and Product Pricing

Most of the growing organizations are facing a big challenge of lack of proper marketing and sales of their products and services. They do not get the required footfall and customers to serve the need of the business due to insufficient marketing and sales knowledge. They struggle in generating new inquiries. If inquiries are there, the conversion is very poor. In this way, they keep on pumping money into marketing and eventually get frustrated.

Due to the lack of a proper feedback system and poor after-sales service, their repeat sales and retention of existing customers is also not good.

Since we are living in a virtual world, every organization is required to be a part of it. Digital marketing has become an integral part of marketing and branding. The challenge is to get the right partner on board to serve the purpose. In the absence of proper marketing, it becomes difficult for them to catch the attention of the people. In this fierce competition, it is easy to lose a big client and difficult to make a new client.

A new way of marketing like the franchise system is required to be evolved but the challenge is how to find out the right franchise model among various options like FOCO, FOFO, COCO, and others.

HR, staffing and Training

SMEs find it difficult to get the right talent at the right cost. Even if they are able to secure the right talent they find it difficult to retain them on board.

The other challenge and pain of a growing business is the HR cost. Staff training is also a big challenge in front of SMEs. Many times Hr is not able to exploit the full potential of staff. Training of staff is crucial and getting the right trainer and choosing the right type of training and skill development programme is again a challenge.

The new labour laws and factory act, local unions, and the various compliances pose a big challenge for growing organizations.

Products, services, and Inventory management

Growing organizations are facing a tremendous problem in getting a constant supply of products and services. Quality and pricing is the big issue in front of them. Slow-moving products get obsolete and create great loss to the business. Challenge is how to get rid of slow-moving products and inventory.

Due to the lack of a proper inventory management system, SMEs are always at a risk of incurring a loss. They feel helpless about how to manage the inventory properly and mitigate the chances of loss. Stopping theft and misappropriation of goods is another challenge.

This article is written by CA Madhav Agarwal B.COM., LL.B., ACA, DISA(ICAI), MBF(ICAI).

Having 25+ years of cross-industries experience.

If you are facing any challenges as mentioned above and want to discuss peculiar issues of your business, please feel free to write to us:-



Premium Business Consultants

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store