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Small and medium-sized companies in the big digitization dilemma

On the one hand, Corona and all the associated restrictions, especially the lockdowns imposed in Austria, have hit many companies hard. Not only in trade, sports and leisure, which had to close for months, but also in the small and medium-sized craft and commercial enterprises that shape the domestic economic structure. On the other hand, according to studies and many experts, the pandemic has also led to a real boost in digitization and a new work culture with more efficient processes and more transparent structures.

However, as a current survey by the international auditor and consultant Mazars shows, this boost has by no means reached everyone and evenly. “The larger companies are, the more digitization measures they have taken. Even before Corona and even more since then,” says Michael Dessulemoustier, Partner at Mazars Austria (see interview below).

SMES IN A QUEST.

In contrast to larger model companies that are also networked on the international markets with appropriate organizational structures and young start-ups that have digitization and digital business models written into their DNA, the situation is different with the classic, mostly owner-managed small and medium-sized companies in more traditional sectors out. A survey by KMU Forschung Austria lists, for example, strategies and measures in selected craft and commercial sectors during the Covid crisis. From overtime reduction and short-time work, use of tax deferrals, emergency and hardship funds to bridging guarantees for working capital loans, there is a lot, but one thing is not: digitization.

“During this period, SMEs struggled to keep operations running and had neither the head nor the resources to convert processes,” states Dessulemoustier. His study proves that smaller companies actually allow home office much less often in administration, where it would be quite feasible in contrast to production, and have retained inefficient processes such as printing out electronically received receipts together with manual re-entry.


Austria is one of the richest EU countries and is only in tenth place in the Digital Economy and Society Index.


HARALD MAHRER PRESIDENT WKO


This coincides with a finding that WKO President Harald Mahrer quoted at the presentation of the Microsoft initiative “Make this morning possible” to strengthen the business location through digitization: “Austria is one of the richest EU countries, but is in the digital economy and Society Index only in tenth place. As a location for innovation, we have room for improvement here and need greater access to digitization and more awareness-raising for better framework conditions.”

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DIGITAL DIVIDEND.

Another study by economist Christian Helmenstein and the consulting firm Accenture from the previous year shows which economic effects can be gained through increased digitization: Each additional digitization step that a company successfully takes increases sales and productivity. The effect is all the stronger, the higher the digital starting level already is. Investments in digitization are worthwhile for companies of all sizes and in every starting position. However, large and already well digitized companies benefit more than small ones from economies of scale.

This insight into the “digital dividend”, which was empirically proven for the first time as part of the study, also names the digital dilemma for SMEs: A gap compared to more digitized competitors tends to get bigger and bigger. According to this, SMEs would have to digitize their processes even faster and more decisively than everyone else. Helmenstein locates the “greatest need to catch up” with them.

PERSPECTIVE AND TOOLS.

Mazars partner Dessulemoustier locates the critical threshold, below which the level of digitization is significantly weaker, at around 100 employees: “That is probably a critical size, from which a different organization is required, in which the conversion to digitization is obviously easier.” Although there is a whole range of funding and funding bodies for digitization projects, these SMEs often lack a clear view of the funding jungle. “A point of contact is needed that coordinates all funding options,” says the expert. In terms of content, he sees the most worthwhile first step into the digital age in accounting: “There are enough tools on the market for this. And especially when it comes to accounting, payroll accounting and all HR issues, even an owner or managing director with only ten or 15 employees can free himself from many, sometimes tiresome activities .”


Larger companies are more digitized. The focus should therefore be placed on SMEs – I see a need to catch up here.

CHRISTIAN HELMENSTEIN INSTITUTE OF ECONOMICS/CHEFÖKONOM IV


A specialist for such tools is BMD, a local provider of business software for companies and tax consultants based in Steyr, which is particularly predestined for use in small and medium-sized companies due to its easy adaptability. BMD Managing Director Markus Knasmüller knows the SME problem: “Where there is little technology awareness, it is often difficult to get started. Electronic billing has not progressed much for a long time. Many companies only switched when it was made mandatory by the federal government.”

However, once an entrepreneur has decided to go digital and is personally behind it, in his experience the changeover often works more smoothly than in larger organizations with their more complex structures. SMEs in cooperation with their tax consultant can benefit from automation and AI in accounting just as well as large companies: automatic handling and simplified account assignment and posting of documents, error avoidance, financial overview in real time, guaranteed compliance with payment deadlines and, above all, the liberation of numerous associated with all this routine tasks.

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With the new BMD Go app, the system house offers a tool for simple digital recording of receipts, but also for mobile time recording, for example on site in construction projects. The data recorded in this way is transferred directly to accounting, avoiding error-prone interfaces. Another example is an interface to bank data that makes it much easier for companies and their tax advisors to process payment transactions together. BMD has integrated this “finAPI” into its software. “The company releases the payment with its access data and thus retains control over its bank connections. The tax office receives the bank transactions, almost as a by-product, automatically,” explains BMD sales manager Wolfgang Floissner. The digital race is by no means lost for SMEs, despite being behind.


INTERVIEW

“Sufficient tools on the market, but SMEs lack resources”

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Mazars-Partner MICHAEL DESSULEMOUSTIER

© Provided

Mazars partner MICHAEL DESSULEMOUSTIER on the vulnerabilities of SMEs in digitization.

trend:
Has the much-cited digitization boost caused by the pandemic really reached everyone?
DESSULEMOUSTIER:
The larger companies are, the more digitization measures they have taken. Big ones were already doing a lot before Corona and have been doing even more since then. Unfortunately, the smaller ones had little digitization beforehand, and hardly anything has happened during the pandemic.

Why?
From my experience, SMEs had to struggle with the organization and maintenance of operations under constantly changing conditions during this time. They had neither the head nor the resources to change processes. This assumption was then actually manifested in a scientific study.

What exactly did you collect and what insights did you gain?
It was about digitization processes, especially in accounting, in companies with 20 to 500 employees, whereby the evaluation was further differentiated according to size classes. It turned out that 100 employees are probably a critical size, from which a different organization is required, in which the conversion to digitization is obviously easier. Underneath there is a break in the implementation: Smaller ones have made home office much less common in administration. They work paperless in accounting to a much lesser extent than larger companies. Even receipts, most of which are digital today, are often still printed out and entered manually instead of being processed digitally.

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There are countless funding measures for digitization. But what is missing is a contact point for SMEs that coordinates everything.

MICHAEL DESSULEMOUSTIER MAZARS AUSTRIA


Insufficient resources to advance digitization, hence inefficient processes that tie up resources. How do entrepreneurs get out of the dilemma? where to start
Accounting, where simple processes are often repeated and numbers are processed, is a good place to start with digitization. There are enough tools on the market for such processes, you don’t have to reinvent them, and thanks to a variety of subsidies, it’s not a cost issue, but an organizational issue. In private, getting started with digitization when shopping or using media seems to be much easier than at work. An owner or managing director with only ten or 15 employees could free himself from many, sometimes tiresome activities, especially in accounting, payroll accounting and all personnel issues.

Could more be done for SMEs in terms of the framework conditions?
There are a large number of individual funding measures and funding bodies for topics related to digitization – from AMS, AWS, FFG, ministries, federal, state and chambers. All have buffs for specific areas, some temporary. Companies are overwhelmed with getting an overview of all these subsidies. There needs to be a central point that coordinates everything as the first point of contact for everything. It is to be hoped that the newly created State Secretariat for Digitization will become such a digitization hub and coordinator.

What if nothing happens?
SMEs are the backbone of Austria’s economy. Good jobs are done there, but they don’t make any progress when it comes to converting processes. Our study is a wake-up call. The generation of digital natives is now entering the job market. There they meet SMEs that only work digitally to a small extent. Nobody wants to sort receipts. Those who do not digitize not only miss opportunities on the job market, but also miss finding a successor and passing on the business.


The article is the trend. Taken from the PREMIUM issue of May 25, 2022.

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