Managing cash flow a top challenge for SMEs: Survey

Managing cash flow a top challenge for SMEs: Survey

Delays in receiving payments from customers is the top financing challenge faced by a quarter of small- and medium-sized enterprises (SMEs) surveyed by SPRING Singapore.

SINGAPORE: Delays in receiving payments from customers is the top financing challenge faced by a quarter of small- and medium-sized enterprises (SMEs) surveyed in Singapore.

This is according to a recent study conducted by SPRING Singapore, which polled 1,645 SMEs.

“The customers are delaying payments to them and this affects cash flow”, said SPRING Singapore’s assistant chief executive Chew Mok Lee. “You may have sales, but if you can’t collect, it’s a big issue.”

Companies that are engaged in project-based work that stretches over a longer period of time are also more likely to face such issues. For instance, Mr Andrew Tan, managing director for interior furnishing firm d’Doubles cited collection of payments from the firms’ projects as a key challenge.

“Usually we don't get upfront deposit payments, so we have to actually finance the project. So if it's a large project like a S$2 million project, we have to have the funds ready to start off the project to buy the necessary goods upfront," he said.

Other industries that typically see such problems includes construction firms, said Ms Chew.

The findings from SPRING Singapore’s study were released in tandem with a separate report from the Institute of Singapore Chartered Accountants (ISCA) and SAP, which revealed that Singapore SMEs take 9.2 more days on average to collect revenue as compared to their global peers.


Ms Chew added that a lack of know-how could be a reason why companies experience cash flow problems.

"To address this, we have a support programme called the Capability Development Grant, that could actually help the company engage a professional to help the company to structure its financial systems,” she said.

“I think it's very useful because it actually could help the company streamline the financial support - all the way from your ordering to your cash flow planning to your cash flow budgeting," she added.

For food and beverage chain Wheat Baumkuchen, managing its cash flow was particularly important when it was expanding its business. That is why the company decided to invest in a system to better track where its expenses were going, by tapping available schemes from Government agencies.

Ms Lilian Lee, managing director of Wheat Baumkuchen said: “We went into innovation. We went into inventory control, so we purchased software. We have CRM (customer relationship management) in place. The software is very good, and the one we got under the Capability Development Grant, they actually allow us to track our profit margin even by ingredients (and) per dish - what is the profit margin that we are getting from there.”

Aside from the Capability Development Grant, businesses can also tap on other schemes, such as the SME Working Capital Loan and SME Micro Loan for further assistance.

Financial institutions in tSingapore are also rolling out initiatives to better equip SMEs with financial management tools. Banks like DBS, OCBC, UOB and MayBank have various seminars and workshops that SME business owners can attend for financial management advice.


Cash flow issues aside, it appears that access to capital is not a problem for the majority of SMEs. The survey showed that some 95 per cent of SMEs said they were able to get access to capital – including bank loans.

But Ms Lee and Mr Tan said this could be the case, only if an SME is well-established in the market. “Compare it to (a firm in its) first two years - the banks will not have the trust in you, and also there isn’t credibility,” said Mr Tan.

Ms Lee echoed the same sentiments. “We faced it during our initial stages in the business, probably within the one-year-old mark – probably because don’t have a track record, so it was pretty hard to get funding," she said. "At this stage, I would say that funds are probably more easily accessible.”

Source: CNA/am