Technology has the answers to compliance conundrums faced by MSMEs

MSMEs are called the engine of economic growth, and rightly so. The 63+ million MSMEs employ nearly 113 million people, pushing the Indian economy towards the $10 trillion GDP goal. As the world celebrates MSME Day, we must affirm their immense potential and recognise the unique challenges faced by these enterprises. Contrary to large corporations, these entrepreneurs are often the sole drivers of their business growth and manage operations, technology, and compliance single-handedly. These businesses need streamlined compliance processes to ensure their entrepreneurs can spend more time on business activities without being bogged down by compliance functions.

The compliance landscape for MSMEs is a labyrinth. Each enterprise, based on its business, has a unique set of regulatory obligations, leading to diverse compliance requirements. For example, a Pharmaceutical MSME must adhere to 998 unique compliances, while an Automotive MSME deals with 489 different obligations. Similarly, an MSME alco-beverage brewery must comply with 986 unique compliances, while an FMCG MSME has 831 distinct obligations. These complexities, especially in prominent sectors, underscore the challenges entrepreneurs face. The traditional approach to these compliances, involving manual processes and heavy reliance on external consultants, can cost MSMEs between INR 10-12 lacs per year, a significant financial burden.

According to Sandeep Agrawal, Director & Co-founder, Teamlease RegTech: “While MSMEs are the backbone of the economy, they are also mired in compliance complexities. From the sheer number of unique compliances to the regulatory ecosystem’s dynamic and fluid nature and manual processes, entrepreneurs face many challenges. More often than not, entrepreneurs take up many roles in the business, and compliance functions also take up much of their time. Digitalisation can prove to be a critical step in streamlining compliance processes and significantly reducing the compliance burden. The government is actively moving towards technology-based solutions to push for ease of compliance. The 2023 union budget announcements around PAN being designated as a Single Business Identifier and Entity DigiLocker to be introduced to remove redundancies in compliance documentation portray this stand clearly. MSMEs need to adopt digitalisation to transform their compliance processes. This will also prepare them for the integration of RegTech into the DPI backbone. Adopting digital compliance solutions will be the key to ease compliance and sustained long-term growth.”

As India progresses on its journey towards ‘Viksit Bharat,’ MSMEs will play a crucial role. Ensuring that these enterprises remain compliant is critical. Technology will be pivotal in making compliance management faster, cheaper, and more effective for MSMEs. Advanced compliance solutions can help MSMEs understand their obligations, process payroll and transaction data, prepare regulatory records, flag relevant updates, and maintain a centralised, searchable document repository. This can also facilitate inspection management and ensure seamless operations.

The future of compliance for MSMEs is paperless, presenceless, and cashless. To achieve this, steps must be taken to digitise compliance workflows. MSMEs need to harness technology-based digital compliance solutions to simplify their compliance processes. They provide easy access to regulatory updates to keep them informed. These solutions help businesses track and manage their compliance obligations, store authentic digital copies of compliance documents, and prepare returns in the required format for filing. Digitising can give entrepreneurs improved visibility and control over their compliance functions and significantly improve their ease of compliance. These digital solutions are crucial for the digital transformation of MSMEs and enabling their growth. As the country marches towards becoming a $35 trillion economy in the next few decades, MSMEs will play a central role in driving growth and harnessing the Amrit Kaal.