Digitization of KMUS: Why it is so important

by Meike Müller

Digitalization, or digital transformation or revolution, is bringing about changes in many areas of society. New technologies are being used in business, politics and education, but also in the field of culture. It is becoming a challenge for small and medium-sized companies to keep up with developments and not be left behind and suffer the consequences. In this article, we will briefly explain why digitalization is so important for SMEs, how individual software can be used there and what support the state offers. If you have any further questions or need support with your digitalization process and applying for government funding, we will be happy to help!

Reading time 6 min

You can find this information in this article
  1. We explain what SMEs actually are and what exactly is meant by digitalization
  2. We also give you reasons why digitalization is important for you and your company
    1. We highlight the advantages of digitalization
  3. What can happen if you don't want to digitize?
  4. We'll show you how you can easily start the digital transition in your company
    1. We have a four-step guide for you on how to do this
  5. You'll also find out how custom software can help with digitalization
    1. and which areas of your company can be digitized, for example
    2. We have also highlighted the advantages of digitization software for your digitization
  6. More information on government funding
    1. Funding with "Go Digital"
  7. The bottom line
  8. FAQ: Questions and answers
    1. What is a digitalization premium?
    2. What is an innovation loan?
    3. Does the BMWK provide funding for SMEs?

Explanation of the terms

SME = In Germany, SMEs are small companies as well as small and medium-sized enterprises. This was even defined in an EU recommendation (2003/361). For orientation: Your company is an SME if it has fewer than or exactly 249 employees. In addition, the annual turnover must be less than 50 million euros.

Digitization = Digitization is a very general term that was initially used primarily in relation to the conversion of analogue documents to digital content. It is now also used when it comes to having business processes taken over by new technologies and thus automating areas of work.

Why is digitalization important in SMEs?

As technologies continue to advance, the need for small and medium-sized enterprises in Germany to digitize is also increasing. In order to keep up, it is important that recurring business processes are automated. The use of customized software can simplify tasks and save resources. Companies that are not or not yet involved in this process are at a major disadvantage.

The transformation of SMEs also leads to better discoverability. An online presence makes potential buyers aware of a product or service. According to a survey by Statista, 25.2 million Germans use the internet every day to search for information. If your company cannot be found there, a potential customer has simply been lost.
You can see why digitalization is important and how it can help you in your business by looking at the following benefits:

The benefits of digitalization

  • Customer communication can be simplified
  • Work processes are simplified and in some cases completely automated
  • Information can be made quickly and freely accessible to everyone, so it can also be used when working from home
  • Costs can be reduced because, for example, the use of paper is no longer necessary
  • More visibility, awareness and accessibility through online presence
  • More opportunities to generate potential buyers
  • Individual software development can respond to the company's individual needs and optimize business processes

Problem "No desire for digitalization"

If your company is not yet digitized and you have less desire to drive digitization in your company, then a new problem could soon arise for you. As digitalization progresses in all economic, educational and cultural sectors, a certain expectation is developing among your potential buyers. This is because customers are now very well connected, they know their way around the internet and use new technologies in their everyday lives. They expect an all-round reliable service that offers individual solutions. In addition, information should be freely accessible at all times, inquiries should be answered quickly, delivery deadlines should be met and status updates provided, and much more. You can hardly meet these requirements if you do not digitize or automate some business processes.

You should think carefully about whether you want to tackle the issue of digitalization after all. Below, we also explain the best way to get started, how custom software can help with digitalization and what government subsidies are available to make the process financially easier for you.

How to start digitalization in your company

You don't start the complete digitalization of your company right away. Rather, digitalization is a step-by-step process that takes place continuously. Even in a well-digitized company, there are always construction sites and opportunities for improvement. However, this shouldn't scare you or put you off. Because the more steps you take, the better you will get to grips with new topics and implement them for your company. And if you can't find your way on your own, there are always experts who will be happy to help you with digitalization. In most cases, external consultants are also much better at identifying areas where there is still a need for digitalization. They should look at your company to determine which areas need to be digitalized and in what order.

Once it has been clarified which departments and areas need to be digitalized and a sequence has been established, the next step is to identify the individual small steps that need to be taken to fully digitalize an area. The focus here is on which processes can be digitalized, which components need to be added and which skills are required. You should always set yourself small goals for implementation, as this promotes motivation and prevents your employees from being overwhelmed.

We have put together a short guide to give you a better overview. It will help you to tackle digitalization in your company step by step. Because at first, all the tasks involved can seem quite overwhelming. We recommend that you always focus on one task at a time. Work through one task in your company before moving on to the next. And this is how you can implement digitalization:

Four steps to start digitization

1. what is the current status of digitalization in your company?

The digitalization of your company is a gradual change of small processes. You don't need to worry that the transformation will change your entire company. You can think of it more as individual tasks or processes being simplified or automated. For example, instead of filing documents, you store them in a database.

To get started with digitalization, you should first check the current status. Which areas are perhaps already digitized and which can you immediately identify that urgently need to be digitized? Companies usually start with internal digitalization or with the intention of working as paperless as possible.

2 Is your company prepared for digitalization?

Preparations must now be made to ensure that digitalization is a success. Various criteria need to be considered. Firstly, you need to determine whether the changeover in your company can be managed alone or whether you would prefer to consult experts. Depending on the department and area, these could be software developers or IT security experts, for example. You should also take a look at your competitors in your industry. How have they implemented digitalization? After all, you don't want to be left behind. Another point is to find out about the latest innovations. Is the market perhaps about to launch a new technology? If so, it may be worth waiting for this moment before your company's digitalization is no longer in line with the latest developments within a very short space of time.

3. which areas should be digitized first?

As mentioned above, all areas that should be digitized must first be identified. In the next step, these are then processed one after the other. To do this, you need to think about a sequence.

4 How can the individual areas be digitized?

Once you have determined a sequence, you need to think about how the first area can be digitized first. What technical precautions need to be taken? Is external help needed and which employees are affected? First collect all the tasks and put them in a sensible chronological order. Now you just have to work through them one after the other. Once all tasks have been completed, you can do the same for the next area until all areas have been digitized from scratch.

How can the use of custom software help with digitalization?

Digitalization can be tackled in your company in a variety of ways. One method is the use of software to digitalize internal processes and facilitate collaboration between employees, for example. Depending on the business sector, standard software is also suitable for this. Customized software, on the other hand, focuses on the company's own needs and requirements. Individual wishes and functions can be integrated and offer the company the perfect solution. In the next section, you can find out which areas are worth digitizing with custom software. We also reveal the other advantages of digitization software.

In which areas is digitalization possible or necessary?

It is now possible to digitize a company in many areas. However, it is most necessary where processes can be easily digitized and resources such as time and money can be saved as a result. Internal processes within a company are often the easiest to implement. This would be the implementation of a paperless office, for example. All documents and information are only created and saved on a PC. Invoices are also created online and automatically. This saves the company costs, as it no longer needs paper or storage space for folders full of documents, as well as time, as invoices no longer have to be created manually. All processes for which documents are required and need to be created can be easily covered by individual software. There are now even enough service providers who offer suitable standard software for invoicing. For individual requirements and processes, it is worth getting in touch with a software agency. In a consultation, you will find out what is best for you. Another advantage of a paperless office is that authorized employees have access to the documents at all times. They don't have to be on site at the company to do this, but can also access the files from their home office, for example.

Another digital transformation option for SMEs is for companies that need to make appointments to also offer online appointment scheduling. There is already standard software for this that is used for the respective company. It's not difficult to set up and you give your customers a quick and easy way to book an appointment. Sometimes it makes sense to think even further. If it is a beauty salon that wants to make online appointments possible, then it would be an idea to also set up a suitable online store. Once you have visitors to your website, you might even be able to generate an additional source of revenue.

Of course, there are also areas of your company that can be digitized without the use of software. For example, enabling people to work from home in those departments where it makes sense. This has become increasingly important, especially during the pandemic. The appropriate resources and safety precautions are needed to ensure that working from home can be offered smoothly and safely. Suitable equipment must be made available and IT security must be guaranteed. However, the use of digitization software can also be helpful here. This allows tasks to be better distributed in the home office, the status of projects to be checked and working hours to be adhered to. An individual CRM can definitely be useful here, even if none is currently in use.

Further digitization opportunities open up in areas such as logistics, where warehouse systems make stocktaking superfluous, or in the field of data processing and administration, where databases can help to better structure personnel data. Retail can also be digitized by opening an additional online store with various payment options.

Advantages of individual digitization software

  • Customized software can be adapted directly to the needs of your company and quickly advance digitization
  • Individual software often saves costs and resources as it optimizes business processes
  • When working with a software agency, you have a competent contact person who is familiar with digitalization
  • Individual software can be further optimized, adapted and expanded over time
  • Especially during the coronavirus pandemic, it has become necessary to digitalize certain processes - with individual software, the coronavirus problem can be addressed and hygiene standards maintained
  • The individual software addresses known problems and processes so that employees hardly need any time to familiarize themselves with it

Subsidies for SMEs

The state also offers SMEs funding programmes for digitalization. If you are planning digitalization measures with your company, you should take a closer look at the funding programmes. One of these funding programs is "Go Digital". Some of our customers are already using this funding program to improve their position in terms of individual software or online stores. We'll tell you everything you need to know about the funding program in the following section. We would also be happy to invite you to an initial consultation to discuss your digitalization goals and go through the funding options.

Go Digital

The "Go Digital " funding program is aimed at SMEs and craft businesses. It supports the project to digitize and thus optimize business processes. For this purpose, funding of 30 days with a daily rate of up to 1,100 euros is possible. This requires a so-called main module to be combined with a secondary module. Modules can be: "Digitalized business processes", "Digital market development" and "IT security". Depending on the size of the company, the company is entitled to a subsidy of 50% of the project costs. This would be a grant of 16,500 euros if the total project costs amounted to 33,000 euros.

A company size of less than 100 employees is specified as a prerequisite for funding with Go Digital. In addition, the annual turnover or annual balance sheet total in the year prior to the conclusion of the contract must not exceed 20 million euros. Of course, the company must have a permanent establishment or branch within Germany and be eligible for funding under the de minimis regulation. The subsidy does not have to be repaid. However, payment will only be made after a verification of use.

You should also be aware that you cannot receive funding from Go Digital just once. If one year has passed since the end of the first grant, you can submit a new application for funding. However, you should note that the funding program has so far only been approved until 2023.

Our conclusion

If your company has not yet digitized, now is the right time to take the first step. If you meet the funding conditions, it is definitely worth submitting an application and tackling the issue of digitalization with financial support. To get started, it's enough to set small goals for your company and digitalize business processes step by step. If you don't make the switch, sooner or later your competitors will have overtaken your company. To prevent this from happening, we as a software agency will be happy to assist you and work with you to design a digitalization strategy for your company. This is how we start the digital transformation together! Whether by means of an online store or individual software tailored to your needs, we are at your side. We also offer you comprehensive support and service and have already implemented several projects funded by "Go Digital". Contact us now for an initial consultation and work with us to develop customized software that will help you and your employees get ahead.



FAQ: Questions and answers about funding

We hope you now have a good overview of the digitalization of SMEs. Finally, we have a few frequently asked questions that we will answer for you. If you have any further questions, please contact our team of experts by phone. We look forward to helping you!

  • What is a digitization premium?

    In Germany, there is no specific "digitalization premium" that applies to SMEs (small and medium-sized enterprises) in general. However, the German government has introduced various programmes and initiatives to support SMEs with digitalization. These include funding programs, grants and consulting services aimed at making the transition to digital transformation easier for companies.

    One well-known program, for example, is the "Digital Jetzt" funding program from the Federal Ministry for Economic Affairs and Energy. It is aimed specifically at SMEs and provides them with financial support for the digitalization of their business processes. The funding can be used for investments in digital technologies, software solutions or employee training.

    Furthermore, some federal states or regional economic development agencies also offer their own funding programmes to support SMEs with digitalization. These programs can range from financial grants to consulting services.

  • What is meant by an innovation loan?

    An innovation loan generally refers to a type of financing that helps companies, including SMEs, to implement innovative projects. These loans are often offered by banks, development banks or state institutions and are used to promote research, development and technological progress.

    The application process for an innovation loan can vary depending on the country and lender. As a rule, companies must submit a detailed business plan that describes the innovative project, the expected results, the financing requirements and the planned time frame. Information about the company's experience and financial stability as well as collateral may also be required.

    One of the hurdles in applying for an innovation loan is that lenders make an assessment of the project's chances of success and risk. SMEs in particular may find it difficult to meet this assessment as they may have limited resources and experience.

    The level of digitalization of an SME can play an important role when applying for an innovation loan. Lenders often want to see that the company has already taken steps to digitize its business processes and use technological solutions. A higher degree of digitalization can increase the project's chances of success and reduce the risk for the lender.

    The future viability and competitiveness of the company are also important factors when applying for an innovation loan. Lenders want to ensure that the company can be successful in the long term and that the innovative project will help to strengthen its market position or open up new market opportunities. SMEs must therefore prove that the project creates added value for the company and offers long-term growth prospects.

  • Does the BMWK provide funding for SMEs?

    Yes, the Federal Ministry of Economics and Climate Protection (BMWK) in Germany offers various funding programs specifically for small and medium-sized enterprises (SMEs). These programs aim to help SMEs strengthen their competitiveness, promote innovation and support the implementation of sustainable and climate-friendly projects

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from 06.01.2022

Hello, my name is Meike. I take care of the EXWE back office and am responsible for our social media channels. All of our articles are meant to make your life easier and help you make decisions. Nevertheless, it can happen that something remains unclear, so: If you have questions about this article you can easily reach me at +49 231 93149827.

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