One in two small businesses across ASEAN faces cash flow challenges as a result of the pandemic, and Singapore is no exception. While an optimistic V or U shaped economic recovery is possible, the recovery may be L-shaped if the world is unable to control the virus outbreak. This translates to falling growth and an economic downturn that can last for years. A K-shaped recovery may also happen, where the industries at the top or the graph can strengthen their positions while the rest further degrade. For instance, the manufacturing and financial service sector in Singapore is beginning to see an upward recovery, while the services sector is still stuck in a rut.
With uncertainty in the backdrop, Small and Medium-Sized Enterprises (SMEs) will need to be self-sufficient and agile. They can look into adopting digital solutions for growth, exploring automation for efficiency, and upgrading continuously to thrive in the new normal.
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Adapt with sustainability in mind
The past four Budgets in Singapore dedicated close to $100 billion to helping Singaporeans through the COVID-19 crisis. While the pandemic situation in Singapore has come under control, the government recognised that the resulting economic impact on both the global and local economy is severe and will last for a while. As such, it has announced more support for workers and jobs through the Jobs Support Scheme and COVID-19 Support Grants in August 2020.
While three in four small firms in Singapore are satisfied with the government relief aid provided, it is crucial to understand that government grants are not indefinite and there will come a time in which it has to stop. The government cannot be expected to shore up companies forever. Businesses will hence need to rely less on the grants and be self-sustainable to stay afloat during these difficult times and beyond.
The government has also urged businesses to rethink their business models given that COVID-19 has further accelerated many structural changes which are already happening. These structural changes include a reshaping of globalisation (potential de-globalisation), the digitalisation of businesses and the labour market’s robotic revolution.
Adopt digital solutions for growth
Digital technologies can boost performance in various sectors. E-commerce retailers can sell more by showing targeted products to customers through data analysis. In the realm of engineering and aviation, Artificial Intelligence (AI) can up the performance of gas turbine engines by finding an optimal way to increase thrust and decrease fuel consumption. In logistics, digital technologies can predict traffic patterns and route conditions to deliver goods on time.
The healthcare sector also leverages such technologies to optimise its hospital management and processes. Tan Tock Seng hospital, for example, manages the assignment of patient beds through predictive analytics to predict when patients will be discharged to make more beds available.
Likewise, to grow in a post-COVID-19 climate, SMEs can adopt digital solutions to reach a wider market and seize growth opportunities in the digital economy. The SMEs Go Digital programme, for instance, aims to make going digital simple for SMEs.
Newly-incorporated SMEs can explore the Start Digital Pack to begin their journey to digitalisation. There are also other resources such as the Digital Solutions for Safe Reopening, Grow Digital, SME Digital Tech Hub, and Digital Project Management Services. There is also the Digital Resilience Bonus which uplifts digital capabilities of a broad base of enterprises, and covers aspects such as e-payment, inventory management, accounting and HR/payroll solutions, as well as data mining and analytics.
All these can help firms grow their audience base both in Singapore and abroad, allowing the business to be future ready.
Work on agility and adaptability
With the heightened uncertainty in business outlook, being able to pivot the business and meet evolving demands is key to SMEs survival. Herein lies the need to be agile and adaptable.
Take the severely affected F&B industry for instance. By reaching out to food delivery platforms, some F&B outlets even managed to go beyond maintaining their sales revenue, and have done even better amidst COVID-19 by enabling delivery options available islandwide. Manufacturers of various beauty products have also started making pandemic-relevant sanitisers and masks and making them available on various e-commerce platforms such as Shopee, Qoo10, Lazada, and more.
Another case in point would be Forefront Medical Technology, a firm that was originally focused on making medical products for drug delivery and respiratory care, but had since ventured into building up automation capabilities. During COVID-19, the company expanded into manufacturing products for virus diagnosis, including the production of swabs. While other firms were downsizing, Forefront Medical hired 80 more staff to meet the increase in production demand. By pivoting into new markets and product ranges, firms can seize the opportunities presented in a new environment, particularly as companies in the region reshuffle their production and supply chains.
As evidently shown, by continually finding opportunities and developing smarter solutions to meet market demands, SMEs can indeed survive and recover. Being agile allows the firm to take on pockets of growth and the incoming waves of demand without delay.
Explore automation for efficiency
To reduce reliance on costly manpower, SMEs can examine means of automating as many processes as possible to maintain efficiency levels even during work from home arrangements. Not only does this reduce costs, it also frees up manpower to be reallocated to higher value-added activities that can contribute more significantly to the SME’s growth.
After all, robots are able to do a series of repetitive tasks with minimal supervision. Consider the automation of refuse handling, where a robot can collect trash cans before emptying it into garbage collection trucks under the supervision of a human truck driver who is trained to input instructions into the truck’s operating system. This innovation not only reduces manpower, but also motivates the current pool of human resources to upskill and perform a wider range of higher value-added duties.
Upgrade resources and improve operational efficiency
Firms need not despair during the business lull, you can instead view it as an opportunity to execute an upgrade in business processes. For instance, SMEs can look into upgrading equipment by adopting contactless payment methods and even getting some government bonus in the process.
Staff can also be sent for subsidised upskilling courses to perform higher value tasks when business resumes. There are also Enhanced Training Support for SMEs which includes a higher course fee grant and an enhanced absentee payroll funding. SMEs can enjoy SkillsFuture Funding of up to 90% of the course fees supported by SkillsFuture Singapore, and may claim absentee payroll funding of 80% of basic hourly salary at a higher cap of $7.50 per hour, up from $4.50 per hour.
If costs are still an issue, SMEs can look into re-negotiating terms with vendors, suppliers and landlords to reduce costs in view of COVID-19.
While waiting for the disbursement of government grants or invoice processing, SMEs in need of funding can also explore other financing options such as P2P lending in the interim. Funding Societies’s micro loan product*, for instance, allows an all online application and fast disbursal with approval within 24 hours. For the larger SMEs there are other products such as Business Term Financing, Invoice Financing and Property-backed Financing which can be availed for tenors as short as a few months with or without any collateral.
This short disbursement period makes it suitable for SMEs requiring a quick cash flow turnaround, cover one off costs, pay refurbishment or inventory purchases, pursue business expansions or look into urgent projects and opportunities.
Stay strong and resilient
While some business owners have successfully diversified their business offerings to find new revenue streams, some are still struggling to make ends meet as the economy gradually recovers.
7pm Bloom, a local flower shop, experienced a fall of around 80% in turnover due to a series of wedding cancellations in recent months since the bulk of revenue stems from floral arrangements for weddings. Even demand spikes for Mother’s Day failed to cover rent and staff costs. Event support company Drape Empire also experienced a revenue plunge of around 90% after almost all events were cancelled amidst the Circuit Breaker.
Business owners will need to stay strong while waiting for the economy to recover. To tide over this difficult period, firms can consider tapping on a variety of SME grants in Singapore and also consider invoice financing to maintain a healthy cash flow.
**Funding Societies’ Micro loan is subjected to the terms and conditions of provisioning by FS Capital Pte. Ltd. Funding Societies Pte. Ltd. and FS Capital Pte. Ltd. are part of the Funding Societies Brand.
Disclaimer: Funding Societies Pte Ltd is a crowdfunding platform licensed by the Monetary Authority of Singapore. The products offered by Funding Societies are governed by the Securities and Futures Act (SFA) and shall be construed and understood as a debt security regardless of the references to “loan”, “lending”, “finance” or “financing”. All third party trademarks product and company names are trademarks or registered trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them. View Funding Societies disclaimer notice here. The above article is published on 9th October 2020 and accurate as of date of publication.