By Mr. Rahul Raj, Co-Founder & CEO, FloBiz
India’s Micro, Small, and Medium Enterprises (MSME) sector, often called the “engine of growth,” has contributed to the country’s economic progress. As the backbone of the Indian economy, this sector carries significant weight, accounting for nearly 30% of the country’s total GDP. The MSME sector has been instrumental in creating employment opportunities on a large scale and has contributed significantly to reducing unemployment across the country.
The pandemic caused significant economic disruptions that forced the MSME sector to rethink its approach to business. To adapt, many MSMEs have turned to tech-led, tailored, and innovative solutions offering low-cost options, revolutionising the sector’s ecosystem.
As the digitalisation journey continues for MSMEs, many small business owners feel the need to revisit their accounting needs. They recognise the importance of exercising complete control over their finances, making it necessary to improve their accounting practices to meet the challenges of the changing business landscape.
The advent of AI for accounting
For MSMEs, accounting can be a challenging and expensive task. However, integrating Artificial Intelligence (AI) has transformed financial record-keeping and analysis through digitised methods, resulting in significant revenue increases.
Fintech companies have introduced AI as one of their most significant technological innovations, allowing MSMEs to enhance their financial efficiency and expand beyond their core competencies. Thanks to AI-powered accounting systems, tasks that would earlier take hours or even days to complete manually, can now be accomplished with just a few clicks, and with greater precision.
Moreover, real-time insights into a company’s financial health can be obtained through AI, enabling owners to make data-driven decisions and optimise their business strategies.
By reducing the burden of manual accounting tasks and enhancing financial management, MSMEs can allocate more time and resources to business growth and expansion.
Alleviating taxation troubles
Neglecting tax and accounting responsibilities can lead to severe consequences for MSMEs, making it essential for small business owners to be vigilant about taxation needs.
AI-powered accounting solutions can streamline tax forecasting and help identify potential fraud cases. These platforms leverage predictive modelling and advanced algorithms to alleviate the pain points commonly faced by small business owners.
For example, AI-based accounting systems can handle GST return preparation, validation, filing, and other accounting tasks. Additionally, these platforms come equipped with sophisticated GST reconciliation tools that allow users to detect filing status and identify areas of potential ambiguity.
Debt collection made simpler
With rising debt levels, many MSMEs are now turning to AI-based platforms to modernise their debt collection processes. By leveraging the power of AI and predictive analysis, these platforms are helping MSMEs to recover their money more efficiently and prioritise their collection efforts.
Furthermore, AI-based debt collection platforms are reducing the burden of manual debt collection processes for MSMEs by automating sending reminders and follow-up emails to borrowers. This helps MSMEs to save time and resources, and allows them to concentrate on improving their core business.
Additionally, these platforms provide valuable insights into borrower behaviour and suggest the best communication channels for successful debt collection. With the help of AI-based debt collection platforms, MSMEs can ensure the success of their debt collection efforts and achieve their financial goals.
AI-led actionable insights
AI-powered sales analytics tools can provide MSMEs with a wealth of valuable insights that can be used to drive sales growth. These tools can help identify patterns in customer behaviour, such as what products or services are most popular and at what times of the year. This data can create personalised marketing campaigns targeting customers based on their preferences.
Consider the example of a small retail business owner in a tier II city in India. With the help of an AI-powered analytics platform, the business owner can track sales data and identify which products are popular among customers during different seasons. The platform can also help the owner identify which products are not selling well and need to be phased out or discounted.
Using this information, the business owner can adjust their inventory and promotional activities accordingly, ensuring they have the right products in stock during peak sales periods. For instance, if the data suggests that certain types of clothing are more prevalent during the winter season, the business owner can order more of these products and adjust the store layout to highlight them. This can lead to increased sales and customer satisfaction.
Making risk management more effective
As MSMEs increasingly rely on technology-based operations, there is a growing need for effective risk management processes to address the inherent risks. AI-powered risk management can help MSMEs identify, assess, and mitigate risks. Leveraging big data analytics, AI algorithms, and blockchain technology can be used to construct effective risk-management strategies.
One of the significant advantages of using AI in risk management is the ability to analyse data from various sources to identify potential risks. For instance, AI algorithms can detect anomalies in transaction patterns and identify potential cases of fraud or cyberattacks. By doing so, MSMEs can gain a more comprehensive understanding of their risks and develop mitigation strategies.
Furthermore, AI-powered risk management tools can help MSMEs comply with regulatory requirements. AI algorithms can assist in monitoring compliance with regulations and identifying potential breaches, enabling MSMEs to take corrective action before non-compliance issues arise.
In conclusion, adopting AI-powered accounting solutions can be a game-changer for MSMEs. With the help of AI, MSMEs can streamline financial record-keeping, make data-driven decisions, and allocate more time and resources to business growth.
Additionally, AI-powered solutions can make tax forecasting, debt collection, sales analytics, and risk management more efficient and effective. As the world becomes increasingly digital, MSMEs must embrace technological innovations like AI to remain competitive. By doing so, MSMEs can improve their accounting practices, optimise their business strategies, and achieve their financial goals.
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