Delayed payments from customers remains key challenge for SMEs: SPRING survey

Delayed payments from customers remains key challenge for SMEs: SPRING survey

By: 
Michelle Zhu
18/12/17, 12:56 pm

SINGAPORE (Dec 18): Managing delays in customer payments remains as a key finance-related challenge for Singapore's small-medium enterprises (SMEs) even with easy access to debt financing, according to recent findings from the 2017 SME Financing Survey by SPRING Singapore. 

Now in its second edition, the 2017 SME Financing Survey involved over 1,800 SME respondents across various industries, revenue bands and stages of development, and was conducted by SPRING Singapore in partnership with Dun & Bradstreet between June and Sept this year.

This year’s findings revealed that a majority (90%) of the 13% of SMEs which sought external financing in the past year were successful in their applications.

These largely comprised larger SMEs, which SPRING says are more likely to seek external financing given their growth needs and higher approval rate for debt financing.

The most commonly cited purpose by over 60% of SMEs that sought external financing in the year to date was for cash flow management, with bank loans as the most popular form of external financing across SMEs of all sizes, industries and stages of development.

Meanwhile, micro companies with revenue below $1 million appeared to face lower approval rates, which SPRING attributes to the lack of financial documents and/or weaker business performance, such as insufficient revenue to justify the quantum of financing requested.

A majority 87% of SMEs surveyed which did not turn to external financing indicated that they had sufficient funds to operate, while a 9% indicated a personal preference not to borrow.

Nonetheless, it was found that three in five SMEs (64%) currently face some form of delay in receiving payments from customers, which they also continue to rank as the top-finance related challenge they expect to face in the coming year.

In a press release last Friday, SPRING Singapore highlights the issue of managing delayed payments as a consistent finding across various recent surveys and studies – including PricewaterhouseCoopers’ 2017 Singapore Working Capital Study, which showed that local businesses generally took about 41.5 days to convert working capital to revenue in terms of net working capital days.

See: Why size matters in Singapore's business environment

While acknowledging that external financing can help bridge gaps in payment cycles in the short-term, SPRING recommends that SMEs strengthen their cash flow management capabilities to improve their long-term resilience and competitiveness.

The agency also suggests that SMEs turn to other sources of help made available online, such as the PwC-SPRING Working Capital Study interactive tool, to benchmark their financial performance against industry peers.

“No business can operate successfully without effective cash flow management. Even profitable companies can go under if their cash flow is not well managed, which may result in them being unable to meet their financial obligations. To better manage cash flow, SMEs can put in place regular reviews and controls on financial reporting so that any potential issues with billing, cash collection and credit terms with customers can be promptly addressed,” comments Chew Mok Lee, Assistant Chief Executive, Capabilities & Partnership Group of SPRING Singapore. 

Right timing: STI’s upclimb supported by momentum and moving averages

SINGAPORE (Apr 20): There has been little change in the trend and chart pattern of the Straits Times Index. The index has been on a very glacial ascent towards 3,420, the target indicated when the index broke out of resistance at 3,190 in mid-Jan. Quarterly momentum eased during the past four trading sessions. The 100- and 200-day moving averages have turned positive. This coupled with positively placed DIs and rising ADX should continue to underpin the STI. The only cautionary signals are the somewhat overbought levels of short term stochastics and 21-day RSI, and stagnant vol....
Read More >>

SMI takes legal action against Hyflux; Maybank moves on Tuaspring

(Apr 20): SM Investments (SMI) has terminated its rescue agreement with Hyflux, it announced on Friday. Hyflux, on its part, had already on April 4 terminated the same agreement with SMI. SMI claims it has thus far abided by the agreement. “To clarify, SMI does not accept the purported termination of the Restructuring Agreement by Hyflux on 4 April 2019. This is because the termination was not in accordance with the terms of the Restructuring Agreement," said SMI. Under the agreement reached last October, SMI, led by Indonesian tycoon Anthoni Salim, was to have invested $530 million in....
Read More >>

CCT reports 3.8% higher 1Q DPU of 2.20 cents on higher property contributions

SINGAPORE (April 19): The manager of CapitaLand Commercial Trust (CCT) has reported a 1Q19 distribution per unit (DPU) of 2.20 cents, rising 3.8% y-o-y from 2.12 cents due to higher contributions from Gallileo and Asia Square Tower 2. Gross revenue and net property income (NPI) for the quarter increased by 3.5% and 3.4% to $99.8 million and $79.8 million, respectively. This comes after booking contributions from Gallileo – an office building in Frankfurt, Germany which the trust acquired a 94.9% stake in during June 2018 – as well as higher occupancy at Asia Square Tower 2, both of w....
Read More >>