For small- and medium-sized enterprises (SMEs) sustainability matters – and today, sustainability is arguably best achieved by investing in the right technology.
“The world has essentially become one marketplace, and one workforce,” says Jacobus de Nysschen, executive director at Creative CFO, a financial services firm based in Cape Town that is focused on the SME sector. “To build a successful company today, you have to gain access to the global innovation marketplace, which means embracing the right technology.”
According to de Nysschen, the rapidly changing nature of the modern work environment is requiring business owners and entrepreneurs to rethink their traditional structures – and to look towards a more global and collaborative way of working.
“To survive and thrive in an increasingly complex and dynamic environment, one requires an equally dynamic organisational structure in order to properly address the new challenges and opportunities,” he says.
Cloud-enabled collaboration
While it may sound contradictory, de Nysschen argues that technology should be used to build relationships “to work together on a human level”. In his view, success for SMEs is reliant upon building world-class teams, and harnessing technology to collaborate with top professionals – no matter where they may be located.
To drive collaboration, in real time, he asserts that SMEs must harness cloud computing in the form of Infrastructure as a Service (IaaS) and Software as a Service (SaaS) (see sidebar).
“With cloud computing, SMEs are able to leverage best-of-breed technology, using an accessible, subscription-based model,” adds de Nysschen. “This allows them to compete with businesses that have huge balance sheets and access to capital.”
Transforming the finance department
A clear example of how the cloud is empowering SMEs can be found in the growing role of cloud-based accounting software. New, virtual accounting platforms are enabling business owners to collaborate and work with accountants ‘in the cloud’ by accessing the same set of accounting records – in real time – and sharing information more freely with each other.
This means that instead of capturing data manually, the cloud offers integrated solutions whereby, for example, bank transactions feed directly into the system – removing errors and saving time. Naturally, this frees up accountants and financial managers to provide more analysis and advisory around growth opportunities for SMEs.
Colin Timmis, country manager at Xero South Africa, which provides online, cloud-based accounting software, also points out that cloud-based accounting is creating new opportunities for SMEs through data. This is because digital platforms, whereby data is stored on one, common server, make it easier to integrate accounting with other functions – and with other key SME role players.
“At Xero, for example, we’ve announced new agreements with three South African digital lenders: Bridgement, Retail Capital, and Lulalend,” notes Timmis in Xero’s 2019 State of South African Small Business report. “Initiatives like these will improve businesses’ access to funding – and make the accounting function more versatile and multidimensional.”
Change on the horizon
The 2019 Xero report, conducted in partnership with IT consultancy World Wide Worx, found that only 22% of local SMEs are using cloud accounting tools – with 23% of all respondents still doing their books manually.
This should begin to change soon, however, as overall tech savvy increases and the technology itself becomes more accessible. Arthur Goldstuck, managing director of World Wide Worx, says that SMEs will probably leapfrog from basic, paper-based accounting to cloud platforms in the next 24 months – largely because of new data centres coming online in South Africa.
Earlier this year, Microsoft launched enterprise-grade data centres in Johannesburg and Cape Town. Additionally, Amazon Web Services (AWS) says it will open an infrastructure region in SA in the first half of 2020. According to experts, the new data centres will provide African businesses with far greater availability to cloud services, at a lower cost.
“Previous to the South African data centres coming online, local businesses were forced to connect to data centres in Europe and North America – which put them at a disadvantage to global competitors with decreased latency and higher costs,” says Goldstuck of World Wide Worx.
Training is key
Although the increasing availability of cloud platforms (coupled with better connectivity in the form of fibre and impending 5G rollouts) will certainly give SMEs a boost, it ultimately falls on business owners to drive technology adoption.
Xero’s Timmis explains that a major barrier to technological adoption today is training.
“While this wasn’t reflected in our survey, it’s fair to say that most employees are not hired for their cloud computing skills,” he says.
The 2019 survey found that 67% of businesses don’t intend to allocate budget for training employees around ‘using their essential technologies’.
“There’s an argument that these tools should be intuitive or self explanatory, but it’s not unreasonable to expect that a new invoicing software or CRM system will have a learning curve – however deep or shallow,” notes Timmis.
“Putting processes in place for training employees can be costly in the short term but will pay dividends in the long term as teams upskill themselves with little supervision or additional expense. The financial impact of training an existing team is usually lower than the price of interviewing, hiring and on-boarding new staff.”
Moreover, the Xero report warns that when employees are expected to self-teach and figure it out as they go, they run the risk of “learning to work around the technology rather than with it”.
Timmis points to platforms such as live and online courses, webinars, and events to train employees and to help them become more comfortable using cloud-based tools.
A critical shift
According to several studies and research papers, SMEs in South Africa provide about 61% of the country’s employment.
While many fear that new technologies such as robotics and artificial intelligence will threaten local jobs, it is more likely that the strategic adoption of cloud computing and other digital platforms will in fact create jobs through enabling sustainable business growth.
As the 2019 Xero/World Wide Worx report aptly concludes: “If small businesses seize the opportunity, they won’t just transform their fortunes, they’ll transform those of the entire country.”
This article originally appeared in the 29 August edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
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