Two years ago, you could still find people who preferred cash over cards. Phrases such as Zoom dates and Teams webinars were not yet part of our everyday vernacular. While the COVID-19 pandemic has wreaked havoc to the global economy and devastated many lives, it has also accelerated what would have taken the world quite some time if it had to get there itself – digital enablement and digitalisation.

This has not only happened in large corporate companies, but also in the small and medium enterprise (SME) sector.

A recent publication by the OECD even states that digitised SMEs will be the key to “build back a better economy and society after the crisis”.

“This rapid acceleration and evolution in the business environment in a COVID-19 world provides both opportunities and incentives for SMEs to go digital,” says the OECD.

Karin Mathebula, Product, Sales and Service Enablement Management Executive at Absa, says that SMEs who have not gone digital yet – either by marketing themselves online or by being able to sell their products or services on digital platforms – are missing out on quite a substantial opportunity.

“Due to the impact of COVID-19, customers’ preference for contactless transactions and for shopping online have increased substantially. It is a very good time for SMEs to get themselves online to benefit from an expanded customer base,” she says.

Mathebula adds that going contactless, as part of the digital world, also means that businesses can accept non-cash-based payments.

“This way, you don’t have to handle large amounts of cash at your business sales premises; it can also mean that you use smarter ways of doing business, that allow you to lower your operating costs and risks, and free up time to sell more,” she adds.

It’s not as easy as 1, 2, 3

For many SMEs in South Africa, going digital was the only way to continue doing business, depending on the level of restrictions in place over the last year. It is, however, not that easy to move an entire business into the digital environment.

The OECD study states that many small businesses were not prepared for such a short-notice radical transformation, pointing out that massive gaps in digital capacity and infrastructure existed before the pandemic laid them bare.

It highlights increasing indebtedness and mental fatigue from the stress and strain of the pandemic as hurdles that SMEs face to upgrade their digital capacity or acquire new skills and reach out to new markets.

For Mathebula, specifically in South Africa, access to, and the cost of data remain the most important barriers for SMEs to fully employ digital tools.

“While getting SMEs to see the value of going digital, firstly, and acquiring the actual hardware to do business digitally such as point-of-sale equipment or other devices, can definitely be considered hurdles, but they are not major,” she says.

Mathebula believes that local SMEs’ behaviour has shown that they are willing and able to procure the devices and tools required and that they are also starting to see the value in handling all their operational data digitally, but that the cost of data to operate businesses this way, still remains prohibitive for many.

“The cost of data is a large, structural challenge in South Africa, but within the current constraints all service providers that are helping their clients move online and digital, are actively involved in trying to get their clients the best deal for them to be able to access the benefits of digital tools,” says Mathebula.

Digitise versus digitalisation

Simply moving manual or analogue processes to a digital platform is not going to cut it.

Mathebula believes that “the opportunity for SMEs lies in accessing services, insights, markets readily available in the digital economy and ecosystems. This includes digital marketplaces, eCommerce platforms, digital payments and social media platforms. All of these enable clients to access businesses, businesses to test innovative ideas and to partner with other enterprises. All this is more easily available and accessible because this digital economy and the ecosystems in it make this possible and it can be used to help the business thrive.

Let’s take the application of useful information distilled from data containing financial transactions, to cashflow management,” she says. “There are well-known statistics about how many small businesses fail, especially newly created ones. This is usually a result of not managing cashflow properly, and therefore not being able to grow. It is also often because the business does not know how to grow by accessing more clients through different distribution channels. Both of these factors also impact the ability of the business to raise finances, which is the most commonly identified barrier to growth by businesses themselves. Absa provides a tool that helps SMEs improve their ability to manage cashflow.”

The Cashflow Manager tool is linked to the client’s bank account, whereafter the data from the bank statement and the data containing the financial transactions going through the account automatically upload to the tool, which also has quoting, invoicing and receipting capabilities. The business owner then has real-time data through the Absa Banking App or online channel, that provides insights into which accounts are overdue or outstanding and they can manage the business more effectively. It also has a payroll function and provides financial summaries such as a basic income statement and viewing cashflow at any point in time. 

“It is really about understanding how digitalisation helps you to run and grow your business, and how to mitigate your risk.” This is what we, at Absa, focus on – understanding and supporting our SME clients through their journey over time.

According to Mathebula, ultimately, the benefit of using tools such as these and converting your business data into insights, will eventually outweigh the cost of digitalisation.  DM/BM

Brought to you by Absa Business Banking