Wednesday, October 04, 2006
Challenges for SME's
When you run a company, you run into a number of situations.
*You sell on credit, and people don't pay you.
*You don't have enough stock
*Your goods are outdated, you cannot sell them any more
*You are short of funds
*You don't have enough skilled labour
*You don't have the right communications facilities
To overcome these difficulties, you must at least monitor the situation. You should monitor your debtors, your creditors, and your stock.
In some cases, we may even say that you should monitor for any waste or theft going on. Having been in the SME environment for years, I can say that the one main factor common to all SME's is a budget that is very restricted. Information Technology costs a lot, and it is not only a question of financing the IT, but also to ensure a sufficient turnover in order to recover the financial investment.
Having enough market share is more important for SME's than having finance.
Because if you do not have enough market share, the finance which you may be obtaining will only go to finance losses. At most, we can accept using up some initial capital investment in order to finance the initial months of losses.
We need to make sure that there is enough sales by the 3rd or 4th month or at most the 6th month of operation.
There are companies which have been around for years and that are still struggling with sales. Are we going to help them financially in order to finance their losses ? I don't think so. The biggest help we can give to small enterprises is help them increase their market share.
The role of Information Technology
The main reason, therefore, why you would need an automated information system which can assist you in monitoring your profitability.
We all know that it's not that you have excess cash that you are profitable. You may be buying on credit and selling on cash, in which case you have plenty of cash in the company while still not making profit. When all of a sudden… after paying some of your debts, you realize that you are short of cash, and, well, by then, it's too late.
Instead of monitoring your cash flow, it is better to monitor your profitability. Take care of the pence and the pounds will take care of themselves... Have you not seen those businesses which do not seem to need any financial control ? Why can they go without accounts ? Because they just make sure that they are making comfortable profits.
What is Information Technology
Most of the time people think of Technology as just acquiring equipment. Nothing could be further from the truth. Nor it is enough to add the word "training" to it. When we think of training, we think of something like practising in order to become skilled. There is something missing; it's the whole learning and acquisition of new knowledge, which you may call engineering. In addition to trained workers and trained staff, we need engineers to make the most of the equipment. The gap between the two activities - buying equipment and training - is software engineering.
Information Technology, as part of the service industry, has always been the fuel, the support - the logistics - of the export sector.
It has been fuelling the tourism, the textile and the sugar industries for the past years. All these major economies need powerful logistics in order to perform efficiently.