Singapore SMEs Remain Upbeat Over Local Economy Despite Poor Cashflow

Small and medium enterprises (SMEs) in Singapore remain upbeat over the local economy in the next 12 months, despite the political situation in the U.S., China’s slowing growth, protectionism and declining international trade, according to a survey by independent financial services firm Bibby Financial Services (BFS).

Overheads, currency fluctuations, lack of skilled staff and poor cashflow management on the other hand, were flagged as growing concerns to SMEs.

Conducted annually by BFS, the Global Business Monitor today surveys SMEs in 11 countries across Europe, the U.S., and Asia; on their sentiment towards the economy, access to finance, opportunities and threats.

This is the first year the report features Singapore, with data from sectors such as wholesale, business services and manufacturing. Today, some 99% of the 216,900 businesses in Singapore are SMEs, according to the Department of Statistics Singapore.

“Singapore SMEs are generally confident of the local economy and friendly government policies available,” said Alan Wong, Managing Director of Bibby Financial Services Singapore. “However, to fund new growth and manage issues presented by slow customer payments, many are turning to alternative options such as Receivables Financing. This trend is reflected in the year-on-year growth in invoices factored at BFS, projected to be more than 20% in 2017 and 2018. We see more demand for Receivables Financing in manpower supply and manufacturing sectors such as precisions engineering and electronics.”

While results of the survey reflect SMEs’ confidence in Singapore’s strong fundamentals and economy, they also show that rising costs (67%), currency fluctuations (54%) and lack of skilled staff (53%) continue to be top concerns. Many SMEs see such scenarios continuing into the next 12 months.

Concerns around slow payment

Sixty-eight percent of respondents said that chasing customers for payments was the most problematic aspect of cashflow management. Those polled noted that a vast number of their customers take 30 days or more to make payment (79%). while 18% take in excess of 60 days to pay.

Compared to other markets polled in the survey, businesses in Singapore wait the longest for payment – an average of 45 days. Conversely, SMEs in the U.S. are paid up to 14 days earlier.

Bad debt that has led to financial losses

A third of respondents attributed bad debt over the past 12 months to customer non-payment or insolvency. This cost 34% of those polled, financial losses in the range of S$10,000 to S$100,000, and another 15% of the respondents more than S$100,000 in losses.

Singaporean business owners ranked third after Germany and the UK, on the amount of money written-off as bad debt over the last 12 months (€35,000 or S$56,000). The impact of bad debt was so far-reaching, that 35% experienced how it affected business growth and profits, and another 6% were forced to lay off staff as a result.

Financial readiness to secure SMEs’ next stage of growth

Despite challenges surrounding cashflow and payment practices, Singapore remains a key financial centre of the world. Nearly half of the respondents (49%) believe that availability of finance in Singapore is excellent or good, although one in ten expressed concerns around high interest rates.

Wong concluded, “Generating sales and growth is key but the ability to fund it and collect payment from the debtor is of equal importance. At the end of the day, financial readiness will not only help mitigate some of the challenges SMEs face, it will also better enable them to capture opportunities presented in the new economy. We have to look past ad hoc financing.”