Small and Medium Enterprises (SMEs)

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SMEs i.e small and medium enterprises, a new segment of the business sector has infact today become the most important segment. According to the recent data collected small and medium enterprises represent over 90% of the enterprises in most of the countries worldwide. SMEs refer to those enterprises which satisfy one or more of the requirements like- the number of employees which should be less than or equal to 50 and 250 in case of small and medium enterprises respectively. The second criteria is turnover which should be less than or equal to 10 and 50 crores respectively. However as regards to the size of the balance sheet there is no restriction for small enterprises but it should be less than or equal to 43 crores in case of medium enterprises.

Business environment is very dynamic in nature, it keeps on changing continuously. The enterprises are therefore required to respond to it in a manner, that they can battle out their competitors. SMEs move to become a global player is one such response, infact the most important reason for their growth. They are no longer confined to the local boundaries. Some small and medium enterprises market only their product and services globally and others have production facilitation in one place and market their product services in others. Some others export their products and services to the foreign markets. Globalised market provides them a platform to size up their capital and human resources, improving quality, widening their market share and many other benefits.

Other important reason for the growth of small and medium enterprises is Indian economy’s crave for employment. SMEs serve as an employment hub. A modern and thriving SME sector supports the transformation of an economy by creating jobs and keeping the innovation and adaptation of the economic system. They provide for growth and modernization to maintain their place in the market. It allows competitive firms to chest together and help the economy achieve greater heights. And the most important reason for the growth of SMEs is that it caters to that section of the entrepreneurship which finds it difficult to accumulate huge funds and finance their ideas and expertise.

In order that SMEs can function in the competitive environment, it is necessary that they must be endowed with certain rights. Rights as regards to patents, signs of copyrights, indigenous designs, varieties of plants etc have been provided to help them venture into the market. To regulate the functioning of the small and medium enterprises certain accounting policies have also been laid down. Accounting policies chart out the course of action for them and also make them accountable. The policies that can be adopted by the SMEs are- the methods of depreciation which can be straight line method, written down value method etc; valuation of inventory by FIFO, LIFO, weighted average etc; valuation of fixed asset at cost less depreciation, replacement cost. There are various policies for the treatment of the items so choosing the right accounting policy requires a great deal of research and consideration.

With the advance of time small and medium enterprises are coming to the limelight. The way they are glorified on the media, will definitely lead to a new chapter of the growth of SMEs. “Value Labs” won the “CNBC TV 18 & ICICI Bank Emerging India” award as a small and medium enterprise for the year 2007 in ITes sector. The award was presented by the honourable Prime Minister of India, Dr. Manmohan Singh.

However despite the unbridled growth most SMEs have to face great obstacles. There is lack of infrastructure, experience, expertise that is required to operate in an era of cut throat competition. There is so much of insufficiency in small and medium enterprises. Their plight needs to be revamped by upgrading their structure. They should be provided with modernized and improved technology, better infrastructure and financial support. The administrative and regulatory barriers hindering their growth need to be removed. One such effort is Small and Medium Working Group (SMEWG), whose main aim is the development and the growth of small and medium enterprises. More such steps need to be taken to inspire professionalism and efficacy in the SMEs and make it a booming sector of the economy.
Sheenam Munjral

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