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Major Financial Challenge of SMEs And Why Supply Chain Financing Is The Solution


Small Medium Enterprises (SMEs) are a fundamental part of Singapore’s growing business economy. And with Singapore’s business sector moving upwards, many small and medium firms have an optimistic outlook on where the business sector is headed in the next few months.

“The positive mood is reflected in a new survey that showed business sentiment for the next six months has risen across the board, lifting an index on business outlook from 50.6 to 51.2. A score above 50 indicates expectation of growth, while one below 50 signals possible contraction.” Says a straits times report.

But despite the optimistic outlook, small firms and service providers still face the same old problems and challenges in expanding their business, especially when it comes to financial-related issues. These challenges make it hard for small firms to grow, find new opportunities, generate more value and create jobs for the community.

Cashflow Management Still A Major Challenge For SMEs

In Singapore, firms with less than 200 employees are considered part of the SME bracket. And with a major chunk of the business market classified as SMEs, it’s vital to see the challenges many firms face when it comes to their financial health.

One of the major problems SMEs face in Singapore is keeping their cashflow healthy, with many SMEs struggling with payment delays.

“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.” Reports the straits times.

SMEs remain on the edge when it comes to properly managing their working capital, especially when there is delays in payment. This makes any expansion plan or future growth hard to predict and hurt firms’ day-to-day operations as they try to meet client demands.

Why Supply Chain Financing

Delayed payments can cause a very strained buyer-supplier relationship between SMEs as one tries to remain in business while waiting for payment, and the other struggle to accumulate enough cash to pay their suppliers.

But unlike other forms of financial technology solutions, Supply Chain Financing offers a win-win solution for SME suppliers and buyers without straining their working relationship.

According to the “Supply Chain Finance Fundamentals” report by PrimeReview:

“The health of a global supply chain isn’t just measured by revenue and profit. A more relevant indicator is how efficiently capital flows between buyers and suppliers. Slow moving capital, much like slow moving inventory, creates unnecessary costs and inefficiencies in a supply chain.”

Supply Chain Financing addresses cash flow problems by increasing working capital while reducing supply chain risks, allowing businesses to extend supplier payment terms and giving suppliers the option get paid early through third-party financers. This eases up working capital for both buyer and supplier, giving buyers more time to accumulate cash to pay their invoice without worrying their suppliers with delayed payments.

Implementing An SCF Program Now is a game-changer

As Singapore’s business sector continues to climb, now is the time SMEs must take advantage of the upward trend and find ways to expand both locally and internationally. But with cashflow constraints weighing down SMEs, any kind of expansion is close to impossible.

Early implementation of a Supply Chain Financing (SCF) program can free up blocked cashflow and give SMEs enough breathing room to implement an expansion plan for their business. This will give SMEs the opportunity to compete in the international market, generate value, and provide jobs for the community.

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Joseph Seah

Joseph Seah



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