Cash flow has always been a problem for SMEs, even before the COVID-19 pandemic. A general lack of sufficient support as well as their size made it neither easy nor simple for SMEs to establish a proper cash flow. The onset of COVID-19 only served to make the situation worse as the global economy failed.
However, the Singaporean government has not held any punches when it comes to financial aid and relief in response to the coronavirus. A DBS survey reveals that the government’s efforts are slowly but surely having an effect; with cash flow issues appearing to ease-off over the last few weeks.
Three in 10 SMEs now flag cash-flow concerns as a top issue, compared to over seven in 10, when asked the same question in early February.
DBS bank, which polled 300 firms in its recent survey, attributes this to the authorities’ relief efforts.
“This 40-percentage-point drop indicates that the combined efforts of the government and financial institutions in supporting SMEs in their working-capital needs are bearing fruit, giving SMEs much-needed relief from intense cash flow pressures that they would otherwise be facing,” said the bank in a recent statement.
Due to the more favourable financial situation of SMEs, their focus is now shifting towards establishing new revenue streams to capture growth opportunities as the city-state is easing itself out of the ‘circuit breaker’ lockdown. About half of the surveyed firms identified this as their top priority.
For smaller SMEs with annual revenues of S$1 million to S$20 million, access to working capital and creating new income streams were cited as equally important priorities. Interestingly enough, these firms have ranked digital transformation and worker upskilling among the lowest priorities at this time; with only up to 10 considering transformation as an immediate focus. Only 3 percent of the surveyed SMEs have said that upskilling is a priority.
Almost half of the businesses also cited insufficient knowledge of the digital solutions available, a poor understanding of digitalisation’s benefits, and inadequate employee capabilities among the key reasons that are hindering their digitalisation efforts.
“With SMEs starting to focus on building new income streams, banks, industry associations and the government can step up by offering innovative solutions for our local enterprises to identify and create new revenue opportunities. In doing so, we are helping our SMEs become more resilient so that they are better prepared to ride through the oncoming economic headwinds,” said DBS’ group head of SME banking Joyce Tee.