The priorities of SMEs in an uncertain environment

Although many entrepreneurs are true heroes who have managed to get ahead despite adversity, the government support for entrepreneurship it is vital for SMEs to contribute to the economy with stable and profitable businesses.

Small and medium-sized enterprises (SMEs) are an important part of the world economy, not only because of their rapid growth, but also because they are incubators of entrepreneurs, innovation and diversification. Globally, SMEs represent more than 90% of companies, generating 66% of employment and – according to the International Labor Organization (ILO) – in OECD countries they generate more than 50% of the Gross Domestic Product . By 2030, nearly 600 million jobs will be required to drive the growth and development of SMEs, according to the UN.

In Mexico, this trend is accentuated, since SMEs represent 98% of the country’s companies, contribute to 72% of employment and generate 52% of GDP. By themselves, these figures deserve the attention of governments, who should establish support measures for these companies to boost the already battered economy, providing advice and information and cheap and efficient sources of financing for all of them.

Among the advantages of SMEs is the proximity to customers, flexibility to adapt to changes in the market, products or processes and the speed of decision-making due to its governance structure and proximity to its employees.

However, SMEs must face enormous challenges in the current economic context:

• Difficulty in obtaining external financing at lower rates, due to requirements and the low capital they could have.
• Higher costs in inputs, due to the lower volume of purchases compared to large companies.
• They do not have enough reach in publicity, recognition and trust to access more clients or ally themselves with production chains.
• Lack of knowledge regarding administrative or accounting issues.
• Restrictions to access state-of-the-art technologies or innovate due to their high cost.
• Limitations in working capital that allow them to face crises for long periods, which causes closures of large companies and innovative ideas.

Despite the magnitude of these challenges, the owners of SMEs can follow the following recommendations to guide their daily work and deal with the difficulties they may encounter:

1. Set up your own salary and personal account to separate personal finances from those of the business, in order to be able to track and identify each business expense that is made without confusion.
2. Organize and monitor financial information. Identify fixed and variable expenses with their budgets, record income and monitor expenses.
3. Design a financial plan to track each financial activity that needs to be executed in one or more periods. Set and monitor goals, identify strengths and weaknesses, and plan payment compliance payments and regulations.
4. Reserve an emergency fund that has performance in the face of crises and unforeseen events and continue paying collaborators and suppliers, thus responding to unforeseen financial problems.
5. spend wisely in activities such as training, equipment, systems and installations, which yield another type of benefit to the business.
6. Diversify the business by identifying, with timely and objective information, services or products that complement the main product or service or seeking new markets to improve positioning.
7. Save and cut unnecessary expenses. Being the most common and recurring activity in SMEs, it is also important to always look for expenses to bring benefits.
8. Implement an administrative platform accessible and efficient to help manage finances. Of all those available on the market, the criteria of compatibility, cost and flexibility should govern your selection.

Finally, public and private institutions need to do their part to encourage entrepreneurship, offering better conditions of support, education and advice to SMEs so that they can contribute to the economy in times of uncertainty and volatility.