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SMEs lose Rs 67 lakh annually due to outdated ways of managing finances: Study


BANGALORE: To understand the challenges faced by MSMEs in managing financial operations slow adoption of digital solutions and its impact on their businesses, RazorpayX had commissioned an IDC Infobrief study on ‘SME Banking is Broken: Will India’s Promising Neobanks Fix it?’.

The study attempted to answer some questions around digital adoption by SMEs and what is stopping them from modernizing their finance function. It also highlights the urgent need for SMEs to digitally transform their finance function, as the offerings of traditional banking organisations do not align with their evolving needs. Reiterating why business finance is the core of any enterprise, the study has focused on six key functions that businesses typically spend most of their time on , this includes banking, payroll, vendor management, business reporting, expense management and access to working capital.

Key insights:

  • 1 in every 2 businesses agree that limited resources and lack of knowledge are the two major roadblocks to their digital transformation aspirations
  • The annual average loss from legacy systems dependence is INR 67 lakh (per SME, annually) which equals 1689 hours worth of man hours per SME, per year
  • Over 45% SMEs fear there is a high chance of manual errors because of the dependence on traditional processes
  • Over 56% SMEs reported that they wasted time from deploying resources for repetitive tasks
  • 44% SMEs complained spending significant time (an average of 1446 hours) on financial operations and repetitive tasks

Having acknowledged the challenges, SMEs also realise they need a simple seamless business banking solution that will allow them to focus on core business activities instead of being caught in complicated processes & repetitive tasks.

Here are some key requirements from SMEs:

  • 66% SMEs insist on need for easier access and faster means for loan approvals and verifications
  • 75% SMEs wish for reduction in time spent on data entry when it comes to payroll
  • 60% SMEs want a unified view of financial transactions to check and improve visibility of overall business health and identify hiccups early on
  • 55% SMEs prefer automated approval processes for better time management

In a statement, Shashank Kumar, co-founder and CTO, Razorpay said, “While the banking problems faced by small businesses are many, it’s good to know that some SMEs are slowly becoming aware of how neobanks can solve their broken banking experience. This study attempts to bring to light the challenges faced by SMEs, the enormous time and money lost, due to dependence on traditional banking processes.”

Michael Yeo, Associate Research Director, IDC Asia/Pacific, in a statement said, “Neobanking is at an inflection point in India and has reshaped consumer expectations of what their bank can do for them. However, visibility on what they can do for businesses is yet to be discovered. SMEs in India are in dire need for solutions that can automate their end-to-end financial operations, enabling them to take intelligent and informed decisions on their financial operations. Neobanks in India are now developing technology-first solutions specifically designed for SME needs in a dynamic and ever-changing environment that has the potential to disrupt the incumbent business banking in the long run.”



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