MSMEs – Think Anew and Act Afresh: A Ten Point Plan
B. Yerram Raju*
Hyderabad, May 25 (KNN) MSME Surveys done by various organizations revealed that the packages released by the FM under Atma Nirbhar Abhiyan are not going to benefit them much. Now is the time to think afresh and move fast to be back on rails without expecting much from the Government over and above the guarantees announced. There is full realization among the MSMEs that they should live in debt, survive and if God helps, grow.
If there were perverse intensives earlier that only made them perpetuate small in size and not grow, now they will have to contend with no incentives but to grow with their own ingenuity. In a debt syndrome, this can happen only when there is a strong environment of mutual trust between the lender and borrower. Some State Governments are trying to create a better ecosystem and help the MSMEs.
What you should do as a MSME in this emerging scenario?
Covid-19 in a way opens a chapter in their enterprises. You are an important link in the supply chain and it is time that you make the government come to you and not you stand before them with a begging bowl. You should be able to dictate your supply terms instead of bemoaning that you are after all a cog in the wheel.
There have been surfeit of ideas and strategies but the question that stands in front of you, is: how to respond to their work force who were forced on holiday under lockdown and incentivize them to work for the Company?
All that the Bank wisemen would do is to give a moratorium for principal and interest if their credit record held you good – a standard asset in bank language – by January 2019, a la March 2020, the beginning of lockdown.
--- 1. Make a reasonable assessment of receivables by discussing with the debtors. This will measure up the duration risk of receivables.
--- 2. Take full count of the stock available and see if there is any redundancy. Clear up all the useless stock.
--- 3. Assess the demand for the product in the context of sluggishness around in Consumption and the steep fall in Consumption index. It is very likely that the product required either a makeover or change in complexion.
--- 4. Set up a digitization environment – have a desktop or laptop and buy a ERP solution if you are beyond Rs.1.5cr turnover. Up to 1.5cr turnover, you have Zoho ERP solution offered by the MSME Ministry free of cost. Avail it. Incorporate every aspect of your data – from buyers to sellers, buy to sale, cash to credit, stocks to receivables and enable GST compliance. This will save you the bother of compliance. Any regulatory requirement either from the Bank or the Government, you can pull out.
--- 5. Take work force into confidence: Discuss with them how they would like to be paid their arrears given the firm’s predicament. Place before them your increased obligation to the Bank and tell them what would it mean to pay wages and salaries from the Credit window of the Bank and how much dip would be there for the firm. Disclose your own financial position.
--- 6. Present the future market scenario before them and the prospects it holds both within and outside the country. You may also discuss with them whether they would like to partner with you in the future of the enterprise taking into account the new dynamics of the market. Give them an undertaking that their wages and salaries will be packaged as mutually agreed after paying at least one month’s arrears.
--- 7. Strategize for attaining a brand value for your product within a set timeframe.
--- 8. Discuss with all the other units engaged in producing similar products to gain advantage of (a) a co-working space; (b) co-branding; (c) rational pricing of the product; (d) clusterizing for purchase of raw material in bulk on a shared e-commerce platform; (e) rediscovering the price of the final product taking the logistics into consideration.
--- 9. Rework your Business Continuity Plan and arrive at viability of your enterprise in the emerging post-Covid environment.
--- 10. Place your cash flow position for the next 3, 6, 9, and 12 weeks and seek your Bank’s support.
In States like Telangana you have Industrial Health Clinic to help you out. In other States you have some responsible outfits of Associations like FISME in New Delhi, TANSTIA-FNF centre, KASSIA in Karnataka, etc., that would be happy to suggest right strategies. There would be little purpose in wasting your time any longer waiting for things to happen since the economy is opening up.
*The writer is Adviser, Government of Telangana, Telangana Industrial Health Clinic ltd and author of the Story of Indian MSMEs.