By Dheeraj Toshniwal, Partner – Digital Transformation, BDO India
India is one of the fastest growing economies in the world and the MSME (Micro, small & medium enterprises) sector, with its growth in double digits, is a key driver. The unparalleled entrepreneurial abilities of the founders/promoters supported by the ‘Make in India’ and other government initiatives are key drivers for the growth of the sector.
MSMEs traditionally rely more on people than process or technology and hence, as the operations grow, they start facing newer challenges around operational visibility, controls, regulations, quality and so on. The operational overheads keep on increasing and start to take attention away from strategy and growth. Timely transition from people centric structures to process & technology led organisations can save a lot of operational overheads.
Operating model changes, strong controls framework and an integrated technology backbone can help continue the growth journey and build a robust foundation to become a large enterprise.
Operating Model Evolution: From a centralised founder driven decision making to a decentralised business heads driven decision making, the process needs fundamental changes in the ways of working. Firms need to hire diversified talent, empower them with the right support and provide a collaboration framework for different departments to work together in alignment with the overall business vision. Organisations must find ways to reduce bottlenecks, from founders’ availability of time to availability of credit to availability of resources and so on. An industry benchmarking can help identify the right operating model for the firm, a progressive organisation structure can enable employees to exceed their KPIs and an agile and collaborative way of working can help bring internal & external partners together for improved productivity.
Process Standardisation: As businesses scale, the leadership team requires standardised processes in-place to ensure smooth functioning of the business while having a control over operations. The standard processes like order to cash, procure to pay, record to report etc. help create end-to-end visibility into an organisation’s operations and also help standardise controls (e.g., credit limits, approval authority, 4 eye checks etc.) across the process life-cycle. Process standardisation creates a business rules driven environment, takes subjectivity out of decisioning processes and sets up the stage for automated operations and control
Technology adoption: An integrated technology backbone is a must to support standardised processes and controls. Technology must be looked at as an enabler and not as a cost. An early investment in a robust ERP solution can help improve efficiency, reduce cost, provide the visibility and confidence in data and above all, free leadership time from transactional activities to pursue strategic initiatives. Cloud based ERP platforms have reduced the cost of ownership drastically and can now be adopted by MSMEs rather easily. The capabilities of these cloud platforms are continuously evolving with them adding business specific templates, location taxation support, standard reporting, detailed analytics and so on
As the scale of operations grow, customer segments and competitors also evolve. The data from an integrated ERP platform can provide intelligent insights for the leadership team to understand strengths of the operations, find bottlenecks and leverage the broader partner/industry ecosystem better with very specific asks. The data can further support predictive and prescriptive analytics by leveraging the latest AI/ML tools. Overall, there is a strong case for adopting an integrated ERP platform for continuous growth and an early adoption can help organisations in addressing newer opportunities with a lot more rigor and confidence.
