Business

SMEs continue to face major challenges

Cost, manpower, lack of overseas engagement 
and delayed payments still plague smaller players

By all accounts, the economy had a stellar showing last year, but many small and medium-sized enterprises (SMEs) missed out on the gains, so hopes are high that the benefits might finally start trickling down.

But even if this year is a better one, smaller companies still face a considerable number of challenges.

The perennial gripes about cost and manpower have not disappeared, although they have lessened somewhat in the face of other more urgent issues.

One is the lack of collaborative opportunities with larger local players - the government-linked companies, in particular - to venture abroad for growth together.

Another major sticking point is cashflow management, with an increasing number of firms struggling with delays in client payments.

The SME Development Survey by DP Info in November found about 35 per cent of SMEs saying they had finance-related issues - 13 percentage points more than a year earlier and the highest since the survey began tracking the issue in 2011.

And among these 35 per cent, the proportion experiencing delays in payments from customers skyrocketed from 14 per cent in 2016 to 81 per cent last year.

A separate Spring Singapore poll out last month showed that 64 per cent of SMEs said they were facing delays in receiving payments from customers.

Mr Ho Meng Kit, chief executive of the Singapore Business Federation, said SMEs would do well to put in place better reviews and controls on financial reporting to ensure that potential issues with billing, cash collection and credit terms with customers can be promptly addressed.

One tactic some SMEs use when dealing with delayed payments is to increase the number of days needed to pay their creditors to offset cash constraints.

The other major SME bugbear is the obstacles faced when trying to expand abroad. Internationalisation has been widely encouraged by the government, trade associations and business chambers, but not all firms have managed to make the leap.

The SME Development Survey 2017 found that almost half the SMEs polled had some form of overseas engagement but success has been patchy.

Some sectors, such as infocommunications and retail, have made inroads overseas, but others, like construction, continue to face difficulty in securing contracts.

 

BUSINESS & FINANCE