The economic outlook may have improved, but it seems many small businesses have not been able to escape the chronic headache that is cash flow management.
The data and surveys bear this out.
- DP Info's 2017 SME Development Survey, released in November 2017, painted tight cash flow as a looming threat that could derail SMEs' expansion plans. The proportion of SMEs facing finance-related woes jumped from 22 per cent in 2016 to 35 per cent in 2017. Of these SMEs, 81 per cent were dealing with customers' tardy payments - a huge jump from just 14 per cent in 2016. [READ: Cash-flow issues 'threatening to stall SME growth']
- Spring Singapore's SME Financing Survey, released in December 2017, showed that 64 per cent of SMEs were facing some form of delay in receiving payments from customers. And payment delays were cited as the chief challenge that SMEs are bracing themselves for in 2018. [READ: SMEs hope for pickings in 2018, but are still dogged by challenges]
- More research from DP Info on debt payment behaviour, released in February 2018, showed that the proportion of SMEs with severely delinquent debts (debts that remain unpaid for more than 90 days after they are due) rose to 14 per cent in 2017 from 12 per cent in 2016. [READ: Debt payment behaviour of Singapore SMEs worsened in 2017]
A slightly more optimistic take from the Singapore Commercial Credit Bureau found that overall, local firms are making payments more promptly. But the construction sector bucked the trend, with the steepest increase in slow payments. [READ: Local firms fared better in paying bills promptly in 2017]
So, what's an SME to do? Here are some ideas and tips:
- Gregory Trotter, OCBC Bank's head of cash management, Global Transaction Banking, shared eight tools and tips in response to a Just Ask question: "What are your best tips for monitoring and improving cash flow management?"
- Bank online
- Subscribe to e-alerts
- Bank on the go
- Work within means (not stocking more inventory/supplies than needed)
- Get better terms
- Keep abreast of developments
- Work with key counter-parties
- Speak to your banker for other financing solutions, if necessary
- If you're looking for tech solutions that could aid your small business in cash flow management, what about one of these: 1) Peer-to-peer lending, 2) Online invoice financing, and 3) Cards and credit [READ: 3 tech keys to unlock cash flow issues]
Indeed, so intractable a challenge is cash flow that other companies have spotted the problem that needs solving, and the business opportunity it affords.
Here are a few solutions that have been marketed as ones that will help SMEs tackle cash flow problems.
- The OCBC Business Revolving Short Term Loan, launched in January, offers funding of up to S$200,000 and is tailored for small and emerging businesses that have been in operation for at least two years and need cash flow financing from time to time. [READ: New OCBC loan gives SMEs flexibility]
- DBS has teamed up with global cloud accounting platform Xero to help SMEs better manage their cash flows and access capital. [READ: DBS ties up with cloud firm to help SMEs manage cash]
- Frustrated with the lack of funding options for small companies, former investment banker Rajah Chaudhry turned his attention to providing a solution that would help such firms improve their cash flow. The result? Paycelerate, an online platform to ease small suppliers cash flow woes. [READ: Coming: A platform to ease small suppliers cash flow woes.]
- The nationwide e-invoicing system that will be rolled out soon is also expected to help SMEs manage their payment cycles with more certainty and clarity, particularly in the case of those that still rely on manual invoicing. [READ: A nationwide e-invoice system to link them all]