5 Finance Management Tips for Emerging MSMEs 

  • ∙ 4 min read

It’s difficult to envision India’s growth and development without its micro, small, and medium enterprises. Over the years, small and medium-scale industries have integrated with the country’s economy seamlessly, accounting for approximately 45% of the national industrial output and 40% of its exports.

But the working capital that MSMEs require often makes it difficult for them to sustain during their initial stages. Limited access to the global market, dearth of a skilled workforce, and limited technical resources add to their challenges. Fortunately, with proper financial planning and implementation of cutting-edge FinTech tools, MSMEs can overcome these initial setbacks and gear up for a rewarding journey.

Predict your business’s financial needs

The financial needs of an MSME is largely dependent on the industry, scalability, target group, and other such factors. An analysis of these factors can help predict such requirements and understand how much working capital would be required for the business to grow. Based on this assessment, one can rope in investors, apply for a business loan, start a bootstrapped business, etc.

Carefully evaluate your means to derive the funding

Where to derive your working capital from and whether to apply for funding depends on various factors. Founders of a business would first need to check their net asset value and determine whether they can afford to start as a bootstrapped company. Sometimes, the founders may require financial support to fund a certain part of the total amount required, whereas in other cases, the entire amount may have to be borrowed or secured by going public. Such leadership decisions need careful consideration of the business margin, profitability, technology costs, employee salaries, and other aspects.

Look for high-margin clients who pay on time

Timely payments are a fundamental requirement for MSMEs to grow and expand. It’s easier to form sustaining associations with clients who pay on time and have long-term requirements for the products or services a company offers. It helps to look for clients with a history of timely payments, but additionally, one should have a written payment contract signed, have clearly defined payment terms, and follow a systematic payment schedule. Employing a premium finance management application can help with timely payments.

Maintain a good credit report

One of the most essential criteria for securing a business loan is a good credit report. The lower your credit score is, the lesser are your chances of loan approval. Nevertheless, if you need a business loan despite having poor credit, it helps to look for a bank whose minimum required credit score is low. Also, if your business partner has a good credit score, one should consider roping them in as a co-borrower, which increases your chances of loan approval. Interestingly, a good credit score matters even when one is going public, because it reduces the number of price revisions during the book-building process.

Seek professional assistance as required

While product and service quality is an indispensable aspect of running a successful business, the process doesn’t end there. One also needs to handle the company inflows and outflows systematically, so that the business continues to expand and all the stakeholders receive their dues on time. But these processes tend to involve several manual data-entry tasks that increase workload and reduce productivity. For such reasons, MSMEs should seek professional assistance from financial advisors and leverage AI-powered applications, which handle all such tasks independently.

Our aim at Zuron is to provide an efficient finance management platform capable of handling end-to-end finance payables and receivables, ensuring that suppliers, spokes, and other entities are paid on time, and an MSME receives timely payments from its clients. Our application is a one-stop-shop for different stakeholders in the supply chain, from manufacturers and distributors to MSMEs, banks, and NBFCs. Click here to connect with us and streamline your finance management processes!