In the past five decades, the Small and Medium Enterprises (SME) sector in India has seen tremendous growth, contributing about 45% to Indian GDP and 40% to exports. The sector has soon become the backbone of the country’s economy, employing about 60 million people while creating 1.3 million jobs annually.
Saru Kaushal, Vice President & General Manager, Global Corporate Payments, American Express says, “Flourishing amidst a challenging market place, Indian SMEs are clearly on an upward trend for their growth. According to the recent American Express Global SME Pulse 2017, Indian SMEs have expressed a positive sentiment about domestic and international economic growth; and majority of them also believe they have the right plans in place to increase operations not only in the country, but also secure their business in foreign markets through exports. This clearly highlights that Indian SMEs are ready to take the challenge and face competition. Additionally, Indian SMEs are today not just focusing on increased profit margin and revenue growth, but are also laying equal importance on emphasising long-term business goals for ensuring sustainable business development for future generation and building brand reputation of their company.”
In this highly competitive environment, SMEs are looking for solutions to counter changing business policies, challenge of accessing business finance, and lack of financial discipline to ensure optimum utilisation of capital investment. The need of the hour is to help SMEs understand the importance of establishing financial discipline within their organisation and to ensure effective expense management to drive purchase savings.
According to the survey, a good percentage of SMEs have agreed that cost effective financing and innovative expense management solutions would uplift their company’s business success. Deployment of such new-age solutions being offered by financial and non-banking financial companies will help SMEs streamline the finance function and maximise business savings. Efficient utilisation of capital and ensuring increased control over expenses while also helping companies discover expenditure trends, and tailor their expense saving strategy can all be achieved by using effective expense management solutions such as:
Corporate Cards; an effective expense management tool
Corporate cards being offered by many banking and non-banking financial services are helping SMEs increase bottom line savings with extended payment terms and additional rewards systems. Corporate cards also help companies enhance control on expenses and streamline the payment processes. Everyday business expenses like electricity, telecom, office supplies, and others can also be easily taken care of by using corporate cards.
Procurement needs of companies can today be tackled with dedicated corporate procurement cards; offering an extensive database of supplier and point-of-sale transaction data. This data delivered in a timely and easy to use manner can assist companies manage their procurement program more efficiently. Consolidating the spend with fewer suppliers increases a company’s ability to take advantage of discounts from existing contracts. Moreover, card issuers also offer high level of service and program management assistance through their purchasing and e-commerce consultants; helping companies identify re-engineering opportunities and assisting them with implementation of expense management programs to fit the company’s needs.
Corporate travel cards also offer mid-sized companies a seamless access to pre-negotiated discounts and savings on everyday business spending including travel, dining, shipping and conferencing services. Offering such solutions helps companies who often seek but can’t secure the lower rates usually reserved for large corporations, as well as suppliers who are often looking for ways to better promote their products and services to the middle market. Moreover, many companies may not realize it, but business travel and entertainment are among the top controllable expenses in an organization. Hence, managing expenses on this front is as important as growing revenue. Corporate cards are central to effectively controlling and monitoring business travel expenses. They also give businesses flexibility around when to make payments, which enables companies to manage working capital and cash flows for investment in business growth. Thus, adopting modern day customized Corporate & Corporate Travel Cards provided by leading banks, helps SMEs manage their expenses better. This results in high levels of satisfaction for business purposes as the credit limit is an important factor for SMEs. With the use of corporate cards, SMEs and other enterprises are also able to measure fraud protection and use the card as an important expense management tool.
Use of digitized expense management solutions
With the government’s focus on digitisation, about 82% of SMEs have agreed that digital technology provides new business opportunities for their business, and therefore about 75% of SMEs in India want to invest in latest technologies by 2020. The digitised solutions will help SMEs and mid-market companies keep a track and control their expenses. Moreover, the hassle of seeking approvals and documentation also gets reduced. About 35% of SMEs have expressed their keen interest of investing in modernizing processes through technology by 2020. Moreover, about 33% want to implement cost-saving programs being offered by financial and non-financial companies.
For trading exports, about 45% SMEs have realised that participating in online trading platforms will help them increase exports overseas. Many SMEs are adopting virtual corporate card linked payment platforms, which help them streamline the process of payments between their vendors within India and abroad. The online platform helps companies in pre-deciding the date of payments and amount. Moreover, with the click of a single button multiple payments can be made at a time. These solutions help in adopting automated business finance and compliance systems, reducing the traditional hassle of paper-work. Vendors get their payments on time, while the SMEs can enjoy extended payment terms, improving the cash flow within the business cycle. One such dedicated product in the market is the Buyer Initiated Payments, an electronic payment platform linked to Corporate Cards that reduces processing costs and offers extended payment terms compared to traditional invoice payments.
Thus, in today’s environment it is important for mid-size organizations to find ways to sustain profits and continuously look at opportunities to control cost. This is in order to maintain their financial health and to be better prepared for the future. Expense management solutions therefore, are important to streamline purchasing and simplify reporting and reconciliation processes for business related expenses.
