Technology for MSMEs: The current business spends market in India for MSMEs is estimated to be in the range of $1 – $1.5 trillion, reveals the report ‘Rising Digital Business Spends: Managing a $15 Trillion India Opportunity’ from spends management firm EnKash and management consulting firm Kearney.
The study pegs the overall business spends market in India at $7 trillion with the potential to reach $15 trillion by 2030. It found that the window of opportunity for growth lies in the small to medium-sized businesses given their large volume in the country.
Of the overall 64 million businesses in India, only 3-4 million businesses have shown rapid progress in digitising their business spends. These include large corporates, mid-market enterprises (Rs 5-250 crore turnover) and a rapidly growing ecosystem of start-ups.
Business spends are the business-to-business expenses companies make to their vendors and suppliers. They also include employee expenses, GST payments amongst others.
The study found that while the corporates are rapidly digitising their processes, the mid-market enterprises are slowly migrating to digital modes as they try to strike a balance between the cost involved and growth prospects. The micro-enterprises and retailers are still working largely on cash and cheques.
“MSMEs prefer to make their B2B payments by online bank transfer through NEFT and RTGS and UPI is used for small payments. A new trend that has picked up in the last 2-3 years is the use of commercial cards. Cheques and Demand Draft are used scarcely, mostly for larger sums,” Nidhi Tiwari, Partner, Kearney told FEAspire. She added a large part of these payments include settling the bills from vendors and suppliers and for procurement of office supplies.
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MSMEs might have digitised the transfer of payments but the key challenge hindering them from bringing efficiency in their operations is end-to-end automation. “The activities and processes surrounding the payments are still manually done,” said Tiwari. For instance, the process of vendor onboarding, raising invoices, and managing and tracking collections are manually enabled in small and medium-sized businesses. Also, a lot of small businesses have a standalone solution for each process hindering them from having a cohesive overview of the entire operations.
Digitisation needs to become a norm across businesses, irrespective of scale but what is required are easy-to-use and interactive solutions that smaller businesses can adopt and integrate with their existing systems and drive efficiency, the report suggests.