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Going Global: How Supply Chain Financing Can Help SMEs Go International

scf

For many Small-Medium Enterprises (SMEs) here in Singapore and globally, trading and operating on the international market is a big step forward. Many SMEs aspire to expand towards a global market, operating in various countries and diversifying their product range.

But financial problems, lack of support, and lack of information is hindering many SMEs from going international. According to the strait times:

Small and medium-sized enterprises (SMEs) in Singapore would like more information and support on global trade opportunities to help them internationalise… Suggesting there is room for further growth, the accounting body’s research revealed that nearly half of respondents in its latest survey would still like to receive information and support on international trade opportunities,”

An HSBC report also supports SMEs move towards the international market, saying it could bring in more cash into the country:

Singapore’s mid-market enterprises (MMEs) are the cornerstone of Singapore’s economy but could contribute millions of dollars more to the economy if they were to maximise international trade and export opportunities… The HSBC report explored the business strategies of 1,400 MME senior executives in 14 countries – including 100 executives from Singapore. The report also included economic analysis of MMEs across each of the countries. 

SMEs’ Financial problem

But despite the big potential of having local start-ups and small firms internationalise their operations, they face big problems that hinder them from going global.

One of the biggest financial challenges of many SMEs in Singapore is managing their cash flow. This is a big hindrance to their growth and international expansion since keeping up with day-to-day operations, like employee payments and maintenance budgets, are hard to manage and projected cash inflows are difficult to predict due to manual recording of data.

These factors make any plans of global expansion hard to execute and virtually impossible without any form of financial technology solution.

According to a the straits times report,  “The SME Development Survey by DP Info in November found about 35 per cent of SMEs saying they had finance-related issues… 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.”

Because of delayed payments from clients, management of working capital has become a top-priority agenda for many start-ups, with financial managers finding convenient ways to free cash trapped in the order-to-cash cycle.

SCF As A Fintech Solution

Supply Chain Financing (SCF) program has become a global financial technology solution for better cash flow management, with major international banks reporting 30% to 40% annual growth rates in SCF programs, and SCF growth rates are expected to continue to grow.

Citibank’s report “Benefits Beyond Treasury: How Supply Chain Finance Impacts the Bottom Line” also talks about the benefits of an SCF program in the overall operations of a company:

“SCF clearly provides benefits across the organization: from procurement negotiations, to setting measurable goals within treasury, to company wide profitability.  And as we’ve seen, improved working capital ensures companies remain competitive within their industries.  Perhaps most important, however , is to conduct a benchmarking exercise to ensure you are not inadvertently financing your competitors.”

Having an effective SCF program in place can greatly improve a start-up company’s cash flow statement, giving them a clearer view of cash inflows and outflows. As a result, it becomes easier to manage finances and formulate a plan for global expansion.

Better support for global expansion and a strong financial management solution is the key to a better business climate for start-ups in Singapore. With these factors set in place, internationalisation of local Singaporean start-ups will not be far behind.

 

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Kenneth Tan

Kenneth Tan

Kenneth is a Marketer at Nufin Data, who works with Enterprises of all sizes to help them discover more working capital and competitive financing options. Learn how an effective Supply Chain Finance (SCF) program can benefit your organisation today by getting in touch with him at kenneth.tan@nufindata.com

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