Financial consultants: Today’s catalyst for SMEs to drive financial management, profitability

September 29, 2019 11:36 AM

Credit and Finance for MSMEs: For a sector working on a limited budget, hiring a financial consultant might seem like an extravagance, but, it has become important for SMEs to do so for efficient financial management. 

More often than not, SMEs struggle to access working capital.
  • By R Narayan

Credit and Finance 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 business cutting across sectors and industries. Financial consultants have played a vital role in steering businesses through the unfamiliar terrain of dynamic markets. This is all the more true for small and medium enterprises. For a sector working on a limited budget, hiring a financial consultant might seem like an extravagance, but, it has become important for SMEs to do so for efficient financial management.  

Lack of robust financial planning and internal accounting is one of the primary reasons why SMEs often burn out. Irregular book-keeping also defeats the purpose of a long term expansion. Hiring a chartered accountant often serves as life support to many SMEs as the CA’s will ensure regular tax filing, audits and a reliable overview of your financial health. With their expertise in smart financial management, CAs often contribute to turning the business profitable, keeping a check on cost and helping in adapting to the changing economic environment. 

Best Financing Option

More often than not, SMEs struggle to access working capital. While there is a range of options available for securing funds including bank loans or accessing alternate financing platforms, SMEs do not have the best understanding of which option is best suited for them. Their CAs, having a good understanding of the SME’s need and available options, will guide the former to a service that is best suited to the business. Some options like BizFunds further simplify the task for both the SME and the advisors with their unique product offering.

Optimal Usage of Funds

After attaining the required funds for sustainable operations, the next step is judicious usage of the available resources. While a business owner may think he knows his business well enough to take investment decisions, according to primary research carried out by Power2SME revealed that the SME player is the primary decision-maker for his business. She/he is the CEO, CFO, CTO, Procurement head wrapped into one, and while juggling all these roles, barely finds the time to assess multiple scenarios and the likely impact of his/her choices.

In such a scenario, the expertise of a financial consultant can help SMEs with solutions on how to allocate their finances well. As part of services, they will chalk out the taxes an enterprise is liable to pay along with prioritizing important functions of the business that require immediate investment. Therefore, financial consultants contribute to devising an agile finance allocation and management strategy thereby gradually pushing the business to deliver more value for less cost. 

Also read: Tech boost for MSMEs: Govt to increase number of centres for tech adoption among small businesses

Boosting Bottom-Line 

Financial consultants can play a key role in increasing a company’s bottom-line profit. With their expertise, they can work towards managing the cost of capital by adjusting prices and cutting down expenses. If provided access to the financial data of the company, a consultant can guide SMEs in identifying market challenges and determining solutions for them. Apart from analyzing cash flow, they provide critical inputs for other areas of business including human resource & productivity etc. Overall, a financial consultant can act as a catalyst to drive SMEs towards profitability.  

Right Insurance Policies

Running a small and medium business is an arduous task fraught with operational risks including unforeseen calamities and accidents. They are readily exposed to these possible risks due to underinsurance or no insurance. While SMEs are aware of such solutions, they do not have an in-depth understanding of the benefits offered by these policies. Financial Consultants can provide the right guidance to SMEs in selecting and buying the best available protection plan for their insurance needs. With so many players offering a host of insurance policies to SMEs today, a financial consultant would be the right person to help them navigate through the type of insurance, the insurance amount and the various insurance packages, including property damage, legal liability, credit education, and personal accidents, available. 

Co-ordinating Personal, Business Finances

Very often, a business owner is solely focused on business finances while their personal finances are largely neglected. An experienced financial consultant has the capability to take both business and personal finance hand in hand. This sync is highly important for investment and taxation purposes. It is equally important to maintain a good personal credit score as a good business score to increase future financing options. Also, in the face of credit scarcity, SMEs generally invest their personal wealth in their businesses, which makes drawing a line between personal and business finance more important. A financial advisor will not only keep the personal and business credit score in check but also coordinate with accountants and bookkeepers to ensure seamless sync between the two. 

In the current fluctuating business environment along with the need to address the persistent credit paucity faced by the SME sector, well assessed financial guidance is important, in the absence of which, SMEs might end up steering away from an optimal usage of available resources. Financial consultants can play an integral role in identifying SME short and long-term financial goals, helping them significantly improve their chances to survive in today’s dynamic market.

(R Narayan is the Senior Vice President at FICCI-CMSME and Founder & CEO at Power2SME. Views expressed are the author’s own.)

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