Mar 02 2019

COMMON PROBLEMS FACED WITH SMES: FINANCIAL

With the increase help from the government, Singapore is seeing a rise in the number of SMEs. However, as many as there is, there are a handful of them going out of business.

Rising Cost

With regards to Singapore Budget 2018, there is a ‘need for business to move away from cost competition and differentiate through innovation’ (Tan, 2019). But can we really disregard the topic on cost? You must be shaking your head unwittingly.

With the introduction of technology comes the need to drive a competitive edge, especially since customers are getting sophisticated these days. The need to be price competitive thus threatens the life of some businesses. Creativity and innovative might help. No doubt it requires endless efforts, trial and error; all of which translates to additional cost. And then here comes your electricity bill with an increase of 2.1%. The increased production cost does not seem to be helping much too, does it?

Cash Flow Uncertainties

Providing longer credits to customers might attract ‘patronage’, but at the same time, puts your business at risk, especially default risk. SPRING Singapore reported that 64% of SMEs found themselves having difficulty in timely collection of payments from customers (Spring Singapore, 2017). The delayed cash conversion cycle would mean the need for more short-term cash flows to finance the business. But then comes the problem of attaining approval from the banks. As such, these companies have to look for alternative solutions for their short-term loans, such as crowdfunding platforms etc.

Written by Nikita Ng, Business Associate @bizsquaremc

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