There is no question that the COVID-19 pandemic has spearheaded the fourth industrial revolution (4IR) and caused seismic shifts to the modern business landscape.

In a recent SEDA (Small Enterprise Development Agency) study, 74% of SMEs surveyed indicated that they had resorted to urgent unplanned digital transformation during the pandemic.

As the economy starts to recover from the pandemic and various industries bounce back, many are hopeful that a fertile economic landscape will see SMEs, in many ways the backbone of the South African economy, re-emerge stronger and more resilient than before.

Tom Stuart, Chief Marketing Officer of SME service provider Lulalend, believes that SMEs can future-proof their operations through rigorous market research and building digital enablement into their business models, which includes a consistent brand-driven digital presence.

“Many smaller organisations are undergoing some degree of digital transformation and racing to implement DAPs (Digital Adoption Plans). A good DAP can effectively integrate digitisation into various areas of operations, driving efficiency across the entire business. A single business may deploy numerous applications to facilitate remote work systems; e-commerce platforms; cloud-based data-centres; and cyber-security protocols: all essential considerations for SMEs today,” he says.

Stuart advises SME owners to arrange funding in advance, rather than wait for an urgent need to arise. “SMEs should also be building strong credit records, to ease access to further financing when needed,” Stuart notes.

“Besides accessing finance through fintechs, whose loan conditions tend to be far more favourable than those of traditional banks, many SME are now exploring innovative models like crowdsourcing and crowdfunding”, says Stuart.

Modern fintechs have made the process of accessing  funds increasingly quick and simple, with fully digitised applications taking only minutes, and cash often available in your account the same day.

“There are however still assessments and criteria which applicants are subject to,” Stuart says.

He explains that applications are usually handled via AI-driven algorithms, whose data-points are oriented around two primary factors: Credit score, which determines risk; and affordability, which is concerned with assessing the appropriate amount of funding for a given business.

He urges business owners to cultivate a good understanding of their business’ core function, and their working capital cycle, so that they can effectively predict when the need for extra liquidity would arise.

Stuart says that SME owners should choose to focus on their core business by outsourcing complex financial administration to fintechs and deploying digital applications to automate tasks like invoicing and book-keeping.

He suggests that outsourcing the more complex, labour intensive aspects of financial management to a fintech partner who can simplify and automate these arduous processes, can streamline many areas of business, and is a valid strategy that SMEs should consider, as they rebuild in the post-Covid economy.

“But it’s a balancing act because you also want to maintain control and close observation of your business’s finances.  Many businesses are now looking at which aspects of financial administration could be gainfully automated or outsourced, and what should be handled traditionally, or in-house,” he observes.

Stuart also emphasises the importance of healthy income, cash-flow statements and forecasts, a sound balance sheet, cash reserves, and a margin of safety between borrowing and debt servicing.

“Every business decision has an impact on your bottom line so it is important to continually monitor your financial status to keep your strategy on track and make wise decisions. Internal financial controls are a must,” he concludes.