In every economy, small and medium enterprises are the major contributor to its GDP and employment generation and especially in developing economies. They are the biggest contributor to the growth of an economy.
To manage a business efficiently and effectively a business needs to monitor its working capital closely because it acts as a key driver for the growth of any business. Also for example if 100 businesses fail then 80 of the businesses fail due to mismanagement of working capital.
In today’s world digitization plays a vital role in SME growth. In the beginning, SMEs hesitate to leverage technology and automation in their business but in the long run, digitization helps in achieving efficiency in invoicing, payables, collections, cash flows, and inventory management and thus it results in optimizing working capital.
Digitization can contribute to working capital in SMEs in the following ways :
Helps in estimating working capital requirements
By leveraging, technology businesses can easily forecast their working capital requirements by analyzing the sales forecast using the industry trends and growth
This can be done best by using technology only as there will be no human intervention involved and also the data will be accurate and reliable. Therefore, no funds will be tied in excess working capital and thus businesses will enjoy positive working capital.
Increased revenue and profitability
With the correct estimation of future sales and planning with the help of digital solutions businesses can save some cost in raw materials by buying in bulk.
Also, businesses can run online marketing campaigns to boost their sales and achieve their target, this will result in generating more revenue, more profits and thus resulting in positive cash flows.
Automate your accounts payable
By automating their accounts payable process businesses can pay their vendor by setting up an auto-debit feature, through which businesses can save their time and cost in processing payments.
Also through the auto-debit feature businesses can do easy reconciliation and also payments left their bank account on the due date and hence there will be savings in interest cost, which results in improving liquidity. This also helps a business in building relationships with their vendor, which provides more room for negotiation.
Improved spending analysis
With the help of technology, data is crunched into meaningful information for businesses which helps a business in analyzing their spending pattern.
Through which a business can find which business cost needs to be controlled or what percentage of their expenditure is wasteful and hence this will result in positive working capital.
With the digital adoption in SMEs, now SMEs can see their business activities, data, and information at their fingertips. Otherwise earlier it was manual, time taking and a tedious process.
Now businesses can get real-time access to data according to their needs, which are stored on the cloud. With this benefit of digitization, businesses can make their decisions easier and quicker.
Hylobiz also offers a dashboard on their platform where a business can get to know about their financial health and many more, through which a business can easily make informed decisions about their business.
Helps in avoiding stockpiling
Business funds are tied up if a business is holding unnecessary stocks and is not able to convert that inventory into cash.
To avoid this a business needs an inventory management system backed by technology, which helps to manage inventory digitally, will notify about low running stocks.
Also by automating procurement processes a business can achieve savings in cost and also operational efficiency, which results in a better liquidity position.
Improves credit profile
Businesses who are more adaptive to digitization enjoy more alternative financing options such as working capital loans, invoice discounting, etc. at very competitive rates.
Also with this businesses can build their credit profile and enjoy an edge over their competitors, which helps SMEs to access working capital loans.
At the Hylobiz API marketplace, a business can avail of various services such as invoice discounting, business loans, utility payouts, and much more.
Hylobiz a business-centric fintech platform with its presence in India, UAE, and Bahrain is helping SMEs in digitizing their journey by offering targeted services to SMEs.
Hylobiz helps businesses in automating their invoicing, purchase orders, payables, and collections journey, which creates value addition for businesses. With its tailored services, it helps businesses in managing their working capital and cash flows efficiently.
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