'Strong accounting system needed for SMEs'

NEW DELHI, INDIA: A strong accounting system is important to overcome the financing issues of small and medium enterprises (SMEs), according to a Ficci-IIFT (Indian Institute of Foreign Trade) knowledge paper.

Titled 'Innovation Readiness of Indian SMEs: Issues and Challenges', the paper gives a 20-point strategy for the innovative financing of SMEs to overcome the current bias of banks against lending.

The paper also highlights the importance of developing a comprehensive business plan and urged to reduce opacity.

“The more detailed plan the better chance of a loan getting sanctioned. It also shows your understanding and analysis as well as depth of knowledge in vetting various aspects of the business. It works in resolving certain amount of information asymmetry," said the knowledge paper.

The mandatory disclosure of information, having a strategic partner in business, outsourcing part process, strong organisational structure, use of ICT, proper succession planning, debt management and co-creation of products are some of the suggestions in the paper.