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What makes outsourcing investment attractive for SMEs

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Small and medium-sized businesses (SMEs), which account for 40% of all exports and 45% of India’s total industrial production, continue to experience considerable difficulties in obtaining funding for expansion and working capital requirements. Due to their restricted access to equity capital from external parties and a lack of equity capital, SMEs struggle to scale up since management teams are unable to make major operational changes. This is where the necessity for outsourcing investment management as a viable option for SMEs comes into play.

SMEs in India must invest in outsourcing

In order to save time, expand their business, and engage with professionals in a variety of business operations, 90% of small firms expect to outsource business functions in 2022. However, SME owners would be ready to enlist expert assistance with clear advantages at reduced prices in a situation when SMEs are constantly starved or denied of any type of funding to meet their growth aspirations.

The most expensive source of finance for your company may be equity access. Businesses may suffer if their ROI is lower than their cost of capital. A skilled CFO may next go into the specifics of what generates value and expenses at the portfolio firm, exploring fixed and variable costs to see what maximizes operational leverage.

A key problem for SMEs is to assure timely, accurate, and ever-more-detailed reporting to their investor base. Leveraging an outsourced partner may help SMEs with services like cash flow management, routine accounting compliances, and customizing Tally to function as a cost-effective ERP.

Also Read: Modi: States must act proactively to formalize MSMEs

Leading the transformational charge are CFOs

Small businesses frequently have leveraged balance sheets and debt structures, which need cautious management. Because of this, the owners can place a lot of weight on CFOs that have experience working in these settings and can offer efficiency measures to boost business performance, whether through cost-based transformation or by encouraging a decision-support culture inside the company.

CFOs will provide their experience in the regulatory and economic settings while upholding good governance and controls, and managing the entire process for SMEs looking for investment exposure and wanting to grow operations in other countries.

Conclusion

These days, it is especially advantageous to use the knowledge of outsourced fund management administrators, whether they are present physically or virtually, as SME managers have reported having more difficulty understanding the key levers of financial functions and hiring auxiliary staff in the back and middle offices for this purpose seems impractical. Because financial administrators may implement more strong control frameworks around critical operations and a robust control framework that can boost operational efficiency and reduce risks, more SMEs are favoring the process as outsourcing becomes well understood.

Also Read: For exporters, ICICI bank launches digital services

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