Digitization an integral part of businesses’ survival and success

The future of business is undoubtedly looking bright for the industry, and cloud accounting is already the standard practice for many enterprises. Even though it might not completely replace all current accounting procedures, it will probably take on more significance with time.

IBT spoke with Mr. Ritesh Kumar, co-founder and CEO, TranZact on how digitization and cloud accounting are becoming a more significant component in India due to its convenience, accessibility, and effectiveness, and this trend is likely to continue. The company provides cloud-based automation solutions for sales, buying, inventory, production, accounting, and logistical needs to 10,000 SMEs in India. 

Image Credit: TranZact

IBT: Digitization is a part of every industry now. What is your take on digitization reaching every small business in India?

Ritesh Kumar: Certainly, digitization plays a vital role in today’s fast-paced world, bringing notable efficiency to business operations across the board. Let’s take manufacturing companies as an example, which is the domain we’re aiming to facilitate with our digitization platform. The reason behind this initiative is rooted in personal experience within the SME manufacturing space. In the context of the average individual, we rely on 50 to 60 apps on our phones to streamline our day-to-day activities.

However, many manufacturing companies, despite their complex operations, still rely on Excel and Tally to manage their entire operations. This results in frequent firefighting due to a lot of operational inefficiencies. Moreover, SME manufacturing owners often find themselves devoting 70% to 80% of their time to operational firefighting, leaving minimal room for strategic things like business expansion, product R&D, or establishing organizational structure and culture

IBT: Have we achieved that level of penetration with the access to digitization for the businesses?

Ritesh Kumar: Our belief is that digitization can significantly enhance operational efficiencies, allowing business owners to save a substantial portion of time from the 6 to 7 hours spent on firefighting each day. By saving 2 to 3 hours daily, they can shift their focus to strategic initiatives that are crucial for SME manufacturing owners or any business owner, for that matter. This perspective covers the micro level of the situation.

Zooming out to the macro level you mentioned, the level of penetration has evolved since our inception in 2017. Back then, only around 30% to 40% of the companies we engaged with recognized the necessity for software implementation. Over the course of the past six years, several key macro events have happened, including the introduction of GST in mid-2017. Another transformative event was the Jio 4G launch, which facilitated, high-speed internet access even in the remotest corners of India – locations where many SMEs are situated. This was further boosted by the 2nd and 3rd generations of business owners entering the industry as many of them are coming back to India. The realization that the Indian market offers more substantial opportunities compared to the West prompted many who studied abroad to return and join their family businesses. Consequently, a significant portion, 80% to 90% of our 10,000+ SME Manufacturing and trading clients, fall within this demographic – the 2nd and 3rd generations of business owners.

IBT: How have your business operations evolved through these years?

Ritesh Kumar: From 2020, India’s digitization scenario underwent complete stands till in mid-2020 with the arrival of the pandemic. Large corporate or even manufacturing companies, heavily reliant on working capital, were compelled to keep their operations running to maintain cash flow and business continuity.

Suddenly, the need for efficient remote operation management became a necessity. This led to a considerable uptick in inquiries for our TranZact platform. The situation propelled a shift in our business model. Before COVID, our business revolved around an intensive sales approach. We met customers, managed implementation, ensured delivery, and received payment. The pandemic changed this landscape. We seized the opportunity and pivoted our model, adjusting pricing and shifting to remote interactions via video and phone calls.

This transformation marked the transition from a sales-centric approach to a sales-assisted product-led model. Following the initial pandemic phase, we transitioned from traditional cold calling to digital marketing and started putting a lot of resources into this strategy. The result was substantial growth, transforming our customer base from around 500 paid companies before COVID-19 to approximately 2,000+ freemium companies after the pandemic’s first wave. Today, we cater to about 10,000+ SME Manufacturing and trading companies. Post-COVID, digitization transformed from being an option to a necessity. Even as things normalize, we no longer meet customers in person for sales. All sales interactions take place through video or phone calls. While physical meetings still occur to understand customer needs and psychology, the sales process itself has transitioned to virtual channels. This shift, driven by the pandemic, reshaped our business operations, making digitization an integral part of businesses’ survival and success.

IBT: On the affordability aspects of cloud services,  how do you cater to the medium and small industries, especially in the complex sectors such as iron and steel?

Ritesh Kumar: Our platform can cater to the needs of, say, any company which is having one crore of annual turnover to 100 crore of annual turnover. That is the size of the company that we can cater to. But strength lies between right from Rs. 3 crores annual turnover to Rs.50 odd crores annual turnover, having an employee size of, say, anywhere from 3 people to 30 to 50 odd people. As far as the industry is concerned, we are going after B2B manufacturing and trading companies.

Now, out of that, you are absolutely right. Some of the industries are more profitable in nature. Companies in industrial, electrical, electronics and industry auto components are the dominating sectors and are very profitable in nature. These are very profitable in nature. However, if you talk about affordability, and this is the discussion I keep on having with the owners of the companies.

The solutions that we provide to each company are dependent upon the ROI of the platform. The other thing that I want to put across is that for SME owners, once you are able to tell them the link between the kind of value that you are generating is either hitting the top line or hitting the bottom line. They want a clear-cut correlation between them, then only they are kind of ready to sell out their wallet for these kinds of solutions.

IBT: When we talk about digitization, a lot of advancement has been there but smooth access to the internet is something that is still a challenge in India. How are you planning to address this challenge of access to smart technology, a smartphone or a low bandwidth internet connection?

Ritesh Kumar: Honestly, I don’t have a solution for that as of now. But the interesting part is that there are a lot of things that are happening from the government side. When you look at any company that is doing five crores of annual turnover, they have to do the e-invoicing, they have to do the GST filing, which can happen only through the internet. If you talk about 6 years back, we were having a lot of debate that do we needed to come up with some sort of an offline solution or not. But since the internet has become quite affordable, an individual can take at least two or three connections. So if one internet goes down, at least the other internet can act like a backup. And since there is so much competition in the telecommunication, and telecom companies, the internet cost has become very cheap. Even if private players are unable to address the challenges, it is being addressed by the government itself. And a lot of things are happening on the macro level that is actually helping us to address that concern.

 

Ritesh Kumar completed their BTech and MTech (Dual Degree) from the Indian Institute of Technology, Kharagpur, between 2006 and 2011. He also obtained the Inbound Certified accreditation from HubSpot in October 2020 and completed the Startup School program offered by Y Combinator in May 2020. in 2017, Ritesh obtained the Open Water Diver certification from PADI. He is also a Level II CFA Candidate, registered with the CFA Institute, and holds the NSE Certified Market Professional certification from the National Stock Exchange of India Limited.