Itzik Levy is the CEO and Founder of vcita, the partners-focused SMB business management platform.

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In 2023, small and medium-sized businesses faced a multitude of economic challenges. The lingering effects of the Covid-19 pandemic continued to disrupt supply chains, leading to increased costs for raw materials and transportation. Inflationary pressures further exacerbated financial strains, as businesses struggled to maintain profit margins amid rising prices. Additionally, the labor market experienced significant shifts, with a shortage of skilled workers driving up wages and making it difficult for smaller enterprises to attract and retain talent.

Looking ahead to 2024, these challenges are likely to persist. Economic forecasts suggest inflationary pressures may endure, placing continued strain on SMBs. A recent survey conducted by our company showed that business owners are feeling these economic challenges, with 67% of SMBs citing finances as their biggest worry for the new year.

In the face of economic challenges anticipated in 2024, small businesses can adopt several strategies to navigate uncertainties and promote resilience. One way is becoming more open to the use of technology in their day-to-day business activity. Through the adoption of digital solutions and emerging AI applications, small businesses can enhance operational efficiency, cut costs and broaden market reach. Investing in technology solutions that streamline processes can help position small businesses to adapt swiftly to changing circumstances.

Biggest Concern: Finances

When asked about their top concerns for 2024, economic uncertainty and financial stability are what make SMB owners most anxious. This sentiment has led to rising demand for financial tools that expedite processes, or advanced reporting systems that create more transparency around cash flow. In fact, 49% of SMBs already leverage digital solutions to automate invoicing, billing and payment collection.

AI has the power to play a significant role in helping small businesses confront financial challenges by providing innovative solutions to enhance efficiency, automation, decision-making and overall financial management. From automating payroll and expense tracking to using predictive analytics to analyze financial data, to providing personalized financial advice—there’s a multitude of easy-to-use AI use cases that can help SMBs face challenges head-on.

SMB Digital Tools

When it comes to achieving financial stability and cost-effectively managing business operations, digital tools are now the rule, not the exception. Recent research predicts the global SMB software market will continue to grow at a CAGR of 7.4% until 2027 and reach a value of roughly $85 billion. That’s a lot of digital tools.

Although the adoption of new technology has proved to increase the likelihood of SMBs surviving and thriving, the road to SMB digital adoption has known its ups and downs. Many studies conducted in recent years have pointed out that common barriers to digitalization in the SMB segment are the learning curve associated with using new technology, the cost and the need to invest time in training staff. Choosing the right digital tool can be a make-or-break decision for many SMBs—particularly from a financial perspective.

What SMBs Should Look For In Digital Tools

To truly take advantage of the benefits these tools have to offer, SMBs should assume a bird’s-eye view of their tasks and assess what is most time-consuming, difficult or tedious. Based on these pain points, they may want to aim to implement one tool that’s able to address most of their needs, as opposed to implementing multiple tools that create fragmented experiences and discrepancies.

They can whittle down their options further by looking for tools specifically designed for SMBs that do not require complex or expensive implementation. Additionally, it’s important they look for a tool or platform that has good customer support, so they can get help when they need it. Lastly, they should aim for a tool that is advancing and takes advantage of the best and newest technologies.

The Year To Come

As financial concerns grow among small-business owners, we can expect more and more SMBs to turn to digital tools to fulfill crucial business needs to improve efficiency. AI can add a layer of value to help SMBs in new ways, such as uncovering insights, optimizing pricing, generating marketing content and automating communication with clients.

Digital tools that incorporate AI can provide an edge for their users. With financial worries driving many of their decisions, small-business owners are likely to continue seeking tools built for payment processing, bookkeeping, cash flow forecasting and more, which could be a key factor for achieving financial resilience in 2024 and beyond.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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