90% of SMEs prepare tax returns manually

90% of SMEs prepare tax returns manually
90% of SMEs prepare tax returns manually

This implies a higher operating cost, more time invested with a greater margin of error, and lack of a clear vision of the financial health of their businesses.

Since electronic accounting is mandatory for individuals with business activity and legal persons who bill more than 400,000 pesos annually, the owners of SMEs and their accountants have to invest more time and technological resources to meet their tax obligations.

This is a valuable time that could be invested in the growth of the business and therefore, would affect the macroeconomic numbers of the country. Recall that small and medium enterprises directly influence national productivity, since they account for just over half of GDP (52%) and generate 72% of jobs, according to INEGI.

In Mexico, the payment of taxes is a laborious process, since it involves many administrative tasks. In the last Financial Complexity Index of TMF Group, which classified 94 countries according to their complexity for accounting and tax compliance, Mexico ranked 15th and ranks first in complexity in "Accounting".

Although there are more and more SMEs that decide to automate their processes, there is still a large number -especially the smallest ones- that perform their accounting procedures and their invoicing manually. According to the INEGI, of the 4.1 million SMEs that exist in the country, only 300,000 use technology for their administrative management, that is, less than 10%.

In addition to the loss of time, manual processes can generate several problems:

1. Higher costs, currently Mexican SMEs use up to five different tools for their accounting and financial processes: Excel, online banking, billing software, accounting tool, paper, and pencil probably, in addition to accounting software used by the accountant, which implies more investment in time, labor and money.

The good news is that today there are integral technological solutions such as QuickBooks, which today is the only all-in-one platform in Mexico, aligned with the Mexican tax regulation for issuing invoices stamped and that resolves the issue of bank reconciliation. QuickBooks offers SMBs a comprehensive vision of their business helping them manage and control their finances in an agile manner, generating online executive reports.

2. Higher probability of committing human errors such as mishandling a data or doing an operation wrong. Systematization reduces the need for highly specialized accounting and financial knowledge, in addition to reducing human error.

3. Loss of information, because many of the SMEs that keep their accounts manually only record the data once (replicating the information would take twice as long). What if the information is lost? The cost of data loss for SMEs is just over 2 million pesos on average, according to computer security firm Kaspersky Lab.

4. Manual data management. Relying on accounting and business management software reduces the possibility of manipulating data. The use of this type of tools and the access to the correct information, avoid to the owners of the legal problems in addition to facilitating the taking of opportune decisions for their businesses.

Another advantage of the technology is that, since the appearance of cloud computing and new forms of data storage, the costs of technological solutions have decreased by almost 400%, according to the Organization. Economic Cooperation and Development (OECD). This has made the technology very accessible for SMEs.

SMEs in Mexico have great challenges to be more competitive in the global business environment. On the one hand, the fulfillment of its financial obligations in time and form, and on the other, the increase of its productivity. This highlights the importance of adopting the best technological solutions that allow them to automate processes, reduce the margin of error and above all, optimize the time invested in their administrative management to spend more time with clients or promoting their company.

In Mexico, 8 out of 10 SMEs will be digitized during 2019

Digitization is already a reality, and therefore more and more small and medium-sized companies are joining in the process of digitization, according to the study, Digitization: challenges and evolution of small and medium-sized enterprises (SMEs), carried out by CONTPAQi, a software company business, this year eight out of 10 companies will join the digitalization.

The study also specifies that SMEs allocate 69,000 pesos a year to the digitalization process and that there are 272,606 economic units of this type in Mexico, of which only 37% of these businesses seek to implement continuous improvement procedures to face the challenges .

Another figure that details the report that interviewed small and medium-sized companies in Mexico City, Guadalajara and Monterrey, is that only 45% of SMEs in the country, consider that their investment in digitalization increased last year, while 52% describe that it stayed the same; This is despite the fact that 79% of managers of these organizations perceive great advantages in the implementation of digital technology.

Technology adoption represents advantages for SMEs. For example: the surveyed businesses revealed that they have 36% time savings in their processes and reserve up to 51% in their current expenditure when digitizing their administrative processes.

In this context, medium-sized companies bet more on the digitalization of processes, since they invest -in this area- about 60% more than small companies. In turn, the study highlights that information related to sales, expenses, accounting, billing, purchases and collections are the data that companies most require -in their day to day- to make business decisions.

"For us, this transformation began with electronic invoicing and is an evolution that affects us in our daily lives. Today, business models begin to be digitized, "comments Eduardo Pérez:" Because of this, today we seek to be closer to our customers and suppliers, integrated into a value chain. This change occurs not only in Mexico; but also, throughout Latin America."

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According to the second Credit and Growth Report of Pymes 2019, prepared by Konfío, the lack of access to business financing was the main limiting factor for the growth of Mexican companies. In turn, the economic uncertainty of 2018 represented a brake on the development of SMEs, 20% of employers considered necessary the existence of an environment of stability and security by the authorities.

On access to financing, the Report noted that only 3 out of 10 entrepreneurs have credit for their business. The North region, Baja California, Chihuahua, Durango, Sinaloa, Coahuila, Nuevo Leon and Tamaulipas; The main limitation is the lack of access to financing, according to 40% of entrepreneurs.

Credit history problems were identified by 33.74% of respondents as the main obstacle to accessing financing, followed by failure to comply with the requirements demanded by financial institutions, indicated by 16.13% of employers as their main barrier. Other reasons include not having requested any directly because they do not believe that they are granted (12.80%), lack of credit history (10.87%) and can not prove income (9.82%).

The report warns that the new presidential administration should create an environment of stability and confidence for investments, in order to boost sales of SMEs. 48.13% of respondents expect the government to promote programs to support entrepreneurs, 18.54% want to reduce levels of corruption and 14.75% expect to improve the security conditions for business because they believe that these factors do not favor the situation of your companies to prosper.

Companies must direct greater resources to aspects such as new technologies, attracting talent and seeking investments for their business, since these elements allow them to scale their businesses. "We observe that about 40% of entrepreneurs invest in strategies to create long-term value, these are the ones that have the potential to expand their businesses; This number, although it has improved year to year is still a low percentage against American and Canadian companies "adds Filiberto Castro, Chief Growth Officer of Konfío.

Another finding of the report refers to the people who head SMEs in Mexico. More than 55% of employers have upper secondary education, which exceeds the average of the general population in our country, which is 17%, according to figures from the OECD.

Only 13.58% of entrepreneurs have a basic education level, while the percentage of entrepreneurs with a master's degree amounts to 6.6%. Women in the country who run an SME represent 27% of the total, against the remaining 73% composed of men.

Mexico without competitiveness or talent in SMEs lags among the worst in the world

Although the general idea is that the country has a constant development of specialized labor, technological projects of its own and that is attractive for foreign investments, the reality is that Mexico without competitiveness or talent in SMEs, lags behind the worst of the world.

This is a harsh reality that is sometimes difficult to detect or assimilate, but as new technologies advance and permeate the entire productive spectrum of companies, in this same proportion the shortcomings that we face at the business level to assume these new leadership in the country.

This is even more serious in small and medium enterprises, which are the ones that sustain the national economy and those that generate more sources of employment, but at the same time, they are the ones that have fewer possibilities and resources to adopt new digital tools or to encourage innovative talent.

So this becomes a major danger, as technology advances by leaps and bounds and sometimes does not even give time to know a version of a program or application when the update or the new product is on the market, and without giving us account the level of productivity decreases in companies and lag behind in the global market.

In the framework of the World Economic Forum (WEF), the company Addeco Group presented the results of its competitiveness ranking of small and medium-sized companies in 125 countries around the world, in order to know the levels of development, gender integration and entrepreneurial development that SMEs have globally.

According to Adecco, this Talent and Competitiveness Index "measures the capacity of small and medium enterprises to attract skilled workers to take advantage of digital technology, develop useful and productive development platforms and retain talent".

And the numbers are not favorable for Mexico. As we already mentioned, of 125 countries that make up this list, our country occupies the 70th place worldwide in terms of competitiveness and talent of SMEs, one position below the result of 2104, when it was 69 in this ranking.

In Latin America, we are surpassed by Chile, which is on site 32; Costa Rica with 34; Uruguay in 46th place; Trinidad and Tobago is in 50; Panama in 52; Argentina in 60 and Colombia in 65.

But if being below the average table and closer to the worst in the world is serious, when you analyze other points, in particular, things get even worse.

For example, Adecco revealed that in terms of gender equality, Mexico offers "very low opportunities for women to occupy leadership positions", which is why it ranks 122 out of 125 compared.

In other areas, such as personal security, Mexico ranks 113th; in matters of corruption, in 102 and in "educational relevance to integrate into a job, in the world place 101", according to figures from this competitiveness study.

And despite all these complications, in the Annual Global Survey for CEOs, prepared by PwC and also presented at the WEF, Mexico is very well placed in the perception of top executives of US companies, who consider it within the top 5 levels.

According to this research work that consulted 1,378 CEOs in 90 countries, our country is the fourth preferred by US companies to achieve higher growth, which also implies high levels of investment and the creation of jobs that benefit the national economy.

Thus, in this list that El Economista retakes, "US investors seek expansion in Germany (12 percent of responses); United Kingdom (16 percent of responses) and China (39 percent of responses), "while Mexico reached 11 percent.

However, there is also bad news in this survey, since as a country it ceased to be attractive to investors around the world and according to Bob Moritz president of PwC, "despite having this position for US companies, Mexico left to be on the radar of the 15 most attractive countries for global investment. "

This is some sense is serious, since his position has been declining in recent years since he was seventh in 2017; 13 in 2018 and now "Mexico was left out of the top 15 of the big industrialists," said the director.

In this way, there are many pending in terms of talent development and competitiveness for Mexican SMEs, but the environment, in general, does not offer the best conditions to change this reality, something that the AMLO government will have to focus on since this It has a direct impact on the growth of the national economy.

These are the 5 factors that limit the growth of SMEs in Mexico

The expensive credit, the economic uncertainty, the insecurity, the competition, and the inflation generates a complex scenario.

For entrepreneurs in Puebla, the land did not stop moving after the September 2017 earthquake. Their sales fell 15% that year and continued to fall in the following due to the theft of businesses, the lack of financing and the lower influx of tourists, activity hit by insecurity. The situation did not improve with the start of this year and shows what many companies are doing throughout the country.

"There is instability in the administrative issue - after the death of Governor Martha Erika Alonso, on December 24 - we do not know where the government will allocate the support," says Erik Navarro, president of the Chamber of Commerce, Services and Tourism. in Pequeño (Canacope) of Puebla.

The subsidies from the federal and state governments have been a financing alternative for 2,355 micro, small and medium enterprises (mipymes) in Puebla, which do not have access to bank credit. The benefit reaches less than 1% of the total number of companies in the entity. They are insufficient but necessary, considers Navarro. "The lack of support continues to be one of the factors that reduce their growth."

The lack of access to credit affects three of every 10 MSMEs in the country and is the main reason why their business does not grow, according to the Growth and Credit Report of Pymes 2019, from the Konfío loan platform. "Formalizing a business is simpler than taking out a checking account or obtaining a point-of-sale terminal for your business," says Filiberto Castro, the company's director of growth. The fintech interviewed 1,700 entrepreneurs in the country, to know the factors that slowed its growth in 2018. These are the five main reasons:

Lack of access to financing. In fact, in 2018 there was a decline in access to credit for SMEs, says Castro, as a result of last year's economic uncertainty (generated by the presidential election environment and insecurity). An analysis of the number of active loans granted by the bank and that was included in the report shows a decrease of 5.8% in that line with respect to the previous year. By amount, the decline was 2.2%. "Rates from 18% to 20% are very expensive for MSMEs, their profit margins have been falling," says Daniel Curiel, coordinator of the Council of Industrial Chambers of Jalisco (CCIJ).

It is not only a matter of fees but of financial culture. 30% of those interviewed by Konfío admitted having problems with the Credit Bureau. "We have not been able to develop a financial culture and make a credit history since young, that's a lot," says Juan José Sierra, president of the Employers Confederation of the Mexican Republic (Coparmex) Veracruz.

Entrepreneurs expect government support programs for their businesses. Jalisco has the Business Development Fund (Fojal), which grants loans at rates of 8% to 12%. "His stock market is 1,000 million pesos, but it is insufficient. They pay and they ask again. It has not been able to grow ", exposes Curiel.

Economic uncertainty One in five businessmen pointed to the economic situation as a factor that limited the growth of their business, says the manager of Konfío. According to the report, the percentage of entrepreneurs with sales greater than three million pesos went from 23% in 2017 to only 17% the following year.

The presidential elections and the change of power generated a scenario of uncertainty that does not end. "There is great discomfort due to the issue of shortage - in Jalisco - that generated losses of up to 5,000 million pesos in the first 20 days," says Curiel. The discouragement is, especially in medium-sized companies. "That you need the basics to move your merchandise affected a lot the perception in the entity and in general".

Competition

According to the Konfío report, 11% of the interviewees pointed to this factor as a limitation for the growth of their business. This situation is more present in micro and small companies little technified. "In the metropolitan area of ​​Guadalajara there were 4,000 restaurants seven years ago, today there are 17,000. This speaks to the size of competition that this sector has ", exemplifies the CCIJ coordinator.

Informal commerce is also another variant that affects business, abounds Navarro, of Canacope Puebla. "In 2018, there was a considerable growth of street vendors in the Historic Center of the capital. In the previous government, there was a program to make them migrate towards formality, but with the current one we do not know what will be their axes of action ".

Insecurity

8.7% of employers consulted by Konfío said that insecurity was a factor that slowed down their business. This was most evident Veracruz, Tlaxcala, Puebla, and Hidalgo. "We had an increase in 'curtains' - criminals destroy the curtains of business at night to steal merchandise - in the first four months of the year," says Navarro. Cargo theft by road or train is one of the scourges in Veracruz, "In the last three years there was a rise of 500% in that crime," says the president of Coparmex.

Inflation

The increase in prices and currency risks was present in 8% of the interviewees. An issue that especially affected entities such as Jalisco, Colima, Michoacán, and Nayarit, according to the Konfío report.