By Bernard BEMPONG
Small and Medium-Scale Enterprises (SMEs) contribute significantly to national development. The World Bank defines Small and Medium-Scale Enterprises (SMEs) as “any firm that has an employee size of up to 300 and an annual sale of not up to $15 million.”
In Ghana, Small and Medium-scale Enterprises (SMEs) mainly consist of rural and urban enterprises. The Ghana Enterprises Agency (GEA) defines Small and Medium-scale Enterprises (SMEs) by considering the size of employees and fixed asset.
From the perspective of the Ghana Enterprises Agency (GEA), a firm can be considered as a Small and Medium-scale Enterprise (SMEs) if it employs less than ten (10) employees and has a fixed asset including, plants and machinery not exceeding Gh¢10 million.
In relation to the above, the Ghana Statistical Service defines Small and Medium-scale Enterprises (SMEs) to include any enterprise or business entity that employs less than ten (10) employees for small enterprise while any firm with more than ten (10) employees is classified as a medium and large enterprise.
According to Statista, over 90 percent of business enterprises in Ghana are Small and Medium-scale Enterprises (SMEs) and form around 80 percent of total employment. They also account for some 60 percent of the country’s Gross Domestic Product (GDP) with respect to employment creation, poverty alleviation and revenue generation.
As a result, the Government of Ghana has implemented various initiatives to support their growth over years. These include the establishment of specialized agencies, capacity-building initiatives, financial support programs and policy reforms to create an enabling for them to environment to thrive.
There are various types of Small and Medium-scale Enterprises (SMEs) in Ghana and classified according to their nature of business, size and industry sector. Thus, they operate largely in all sectors of the economy including manufacturing, construction, agricultural, tourism and hospitality.
Risk Considerations
Operations of Small and Medium-scale Enterprises (SMEs) traverse regulatory requirements, licensing obligations, and tax compliance. Non-compliance with a relevant regulation can result in penalties or fines that have implications for their operational sustainability. It is also worth noting that a change in government policy, currency fluctuations as well as inflation have impact on the business environment.
Indeed, Small and Medium-scale Enterprise (SMEs) also face risks relating to changes in market conditions, customer preferences and fluctuations in demand. Aside from that, SMEs also face risks from supply chain disruptions, equipment breakdowns, quality and control issues.
These risks can lead to delays in production, increasing costs, customer dissatisfaction and reputational damage. Small and Medium-scale Enterprise (SMEs) need to monitor and adapt to those risks and equally identify opportunities to succeed.
Key Success Factors
It is worth reiterating that SMEs are essential for fostering innovation, job creation and contribute to economic growth. To sustain their operations and continue to serve as the backbone of the economy, Small and Medium-scale Enterprise (SMEs) need to maintain accurate financial records and regularly monitor cash flow.
Business owners must also be innovative and diversify their customer base by exploring new market opportunities. It is also important that they stay informed about regulatory changes and seek professional advice. Small and Medium-scale Enterprise (SMEs) leaders must invest in appropriate technology solutions and ensure cybersecurity measures are in place.
Concerning technology, Small and Medium-scale Enterprise (SMEs) must leverage on Artificial Intelligence (AI) by integrating their operations with innovative applications to help them a competitive advantage,
Integration of Artificial Intelligence
Artificial Intelligence (AI) systems include robots, computer vision, natural language processing and machine learning. Artificial intelligence (AI) systems are able to sense their surroundings, gather information, make judgments and adjust to changing conditions.
Artificial intelligence (AI) applications are many and span a wide range of sectors including manufacturing, transportation, healthcare, finance, retail and entertainment. At the heart of Artificial Intelligence (AI) is automation such that innovative applications have the capability to transform company operations, improve decision-making and streamline procedures to ensure efficiency.
Artificial Intelligence powered predictive tools can help Small and Medium-Scale (SMEs) to reduce downtime to ensure equipment efficiency and extend the lifespan of their assets. Innovative Artificial Intelligence (AI) tools can also be used to improve quality control by detecting defects and anomalies in real-time during production process of goods.
AI-powered cybersecurity systems can help SMEs to detect and respond to cyber threats in real-time thereby reducing the risk of data breaches and cyber-attacks. Indeed, the integration of Artificial Intelligence (AI) systems into Small and Medium-Scale (SMEs) will eventually empower them to successfully penetrate new markets and increase revenues. Here are some other ways Artificial Intelligence (AI) applications can benefit SMEs:
Book-keeping
Bookkeeping is the recording of daily transactions from invoices until payments. It is a process of documenting each transaction to create a collection of accounting documents. In particular, it includes classifying each item correctly and entering it in real time.
The manual record-keeping system needs special attention in managing all the paper-based receipts and journal entries. Artificial Intelligence (AI) embedded software applications, for instance, a FinovatePro can streamline book-keeping in SMEs operations.
Artificial Intelligence (AI) uses optical character and pattern recognition algorithms to recognize documents, work in real time to reduce errors. In that regard, Artificial Intelligence (AI) makes the book-keeping processes more straightforward and more efficient at all levels of business.
Marketing and Sales
Artificial intelligence (AI) applications can help Small and Medium-Scale Enterprise (SMEs) to analyze large amounts of data, provide valuable insights into customer behaviour, market trends and operational performance. This can inform business decisions, drive growth and improve competitiveness.
Artificial intelligence (AI) can help SMEs to identify new opportunities, predict customer behaviour, personalize marketing campaigns to target customers, enable pricing strategies and improves customer services. Thus, an analysis of historical sales data helps in enhancing product offerings and making pricing strategies that allow SMEs to gain a competitive advantage.
Furthermore, AI-based algorithms, natural language processing or social sentiment analysis can help Small and Medium-Scale Enterprise (SMEs) to identify customer needs and divide the customers into different categories. Artificial Intelligence (Al) algorithms can also help Small and Medium Scale Enterprise (SMEs) to calculate the advertising impacts thereby improving operational and purchase efficiency.
AI-powered chat-bots and virtual assistants can provide personalized customer service, thereby helping business owners to build stronger relationships. The Artificial Intelligence (AI) Chatbot Global Report (2024) indicates that the market and adoption is expected to see exponential growth of $24.08 billion in 2028 at a compound annual growth rate (CAGR) of 29.4 % up to improve customer experience.
Performance Management
Artificial Intelligence (Al) can help SMEs to streamline their HR processes from recruitment and talent management to employee engagement and retention. Artificial Intelligence (Al) algorithms can be used to remove bias and provide insights based on data. To note, Artificial Intelligence (AI) based performance management systems help in reducing human errors, enable continuous assessments and provide real-time analysis.
Challenges and Limitations
While AI offers many benefits for SMEs, there are also challenges relating to cost and accessibility, skills and expertise. Adoption of Artificial Intelligence (AI) in SMEs can be hampered by organizational and cultural factors such as preference for traditional methods and resistance to change.
Thus, in order to deploy Artificial Intelligence (AI) effectively, SMEs need the requisite technology infrastructure, the necessary skills and expertise and an access to high-speed internet to implement and manage innovative AI technologies. Small and Medium-scale Enterprises (SMEs) must ensure that they comply AI with relevant regulations, such as data protection laws. Cultural barriers must be addressed through training and orientation exercise.
Conclusion
There are several opportunities for the development of SMEs, hence promoting technology adoption is crucial to create an enabling environment for SMEs to thrive. Small and Medium-Scale Enterprises (SMEs) must be aware of the challenges and limitations associated with Artificial intelligence (AI) adoption. By understanding these challenges and taking steps to address them, SMEs can unlock the full potential of Artificial intelligence (AI) and drive business success.
BERNARD BEMPONG
Bernard is a Chartered Accountant with over 14 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.
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