Grants are useful in short term but transformation is necessary for long haul: business leaders

WHILE government grants help to ease cash flow concerns in the short term, small and medium-sized enterprises (SMEs) need to digitalise, innovate, and improve productivity to thrive in the long term, said panellists at a Budget 2022 webinar jointly organised by accounting software firm Xero and the Singapore Business Federation.

Said Ferdy Nandes, head of sales in Asia at Xero: "Government support is very helpful, (but) also SMEs now need to up their game and raise the bar. So they need to improve their productivity, and be more innovative and creative as well."

When adopting technology, firms must be clear about the concrete benefits, added panellist Julien Labruyere, chief executive officer and co-founder of Sleek, a startup that assists SMEs: "Make sure that the software and digital projects that companies are embarking on are really useful for the business, for the core functions, and not just a distraction."

The Xero Community: SG Budget 2022 event saw participants ranging from startup founders to SME business owners and C-suite executives.

One topic of discussion was the support provided to SMEs in this year's Budget, including an additional S$600 million under the Productivity Solutions Grant (PSG), and S$200 million to enhance schemes that strengthen digital capabilities.

Another S$500 million was budgeted for struggling workers and businesses under the Jobs and Business Support Package. This includes the new Small Business Recovery Grant, which gives S$1,000 per local employee to SMEs in eligible sectors, up to a cap of S$10,000 per firm.

Chua Ee Chien, managing director of Whimsical Inc - the food and beverage (F&B) company behind restaurants Jekyll & Hyde, Graft, and Operation Dagger - said his firm had tapped the PSG to fund technology that helped to "grow and scale" his business.

However, grants such as Small Business Recovery Grant may only be useful in the short term, he added.

"Any money is going to help, so I don't think anyone's ever going to complain," he said. "But to be upfront, I think it also is a bit more of a band-aid that can be taken off at any time, rather than something that's actually going to help in the long term."

"Cash flow is something that you think about on a weekly and monthly basis, and obviously not as a one-time thing," he added.

Labruyere advised entrepreneurs to look at grants as a "separate line item" from their profit and loss, and not "think that this is going to last forever".

Grants have helped to promote digitalisation, which in turn has led to better outcomes for SMEs, said Tan Swee Liang, Practice Associate Professor of School of Economics at Singapore Management University.

She cited survey findings that SMEs which digitalised their entire business tend to report better revenue growth and are more optimistic than those which digitalise individual departments.

Covid-19 has also helped to boost digital-related revenues, as it pushed more customers towards online shopping, she added.

"When the government comes up with all these initiatives to promote digitalisation... that leads, not surprisingly, to a greater revenue growth. So in terms of effects, I think that it has been really positive," Tan said.

Overcoming challenges

Yet even if SMEs decide to digitalise, they may find it hard to figure out how. Nandes cited a recent study commissioned by Xero, which showed that Singapore SMEs are more decisive and committed to technology adoption compared to the US and UK, but struggle in areas such as "relative judgement" or "choice paralysis".

Xero is committed to helping SMEs overcome these barriers by adding useful features and educating them on the benefits, he said. The Xero platform has features that help SMEs improve production and automate some work, so they can "focus on growing their business", Nandes said.

Automated accounting has helped Sleek "focus on better things", agreed Labruyere, noting that Sleek had a strong ethos of "going digital from the start".

On Sleek's partnership with Xero, Labruyere said: "It's been really enjoyable to find that great piece of software that saves us a ton of time in terms of data entry. I think the main benefit from this will be having access to real time information about my sales, my costs, and everything... enabled by cloud accounting."

Other challenges may come at the stage of implementation, which is "easier said than done", as businesses need to figure out the gaps when integrating online and offline aspects, said Chua.

He recalled using an application for his F&B businesses that allowed customers to order from their table - but later scrapping it, as customers still preferred in-person service.

"It's a fine balance between utilising technology and still giving your customers what they want," he said.

Staff must also be willing to learn and use the platform, and it is here that upskilling and training are useful, Chua added.

"We can only empower people to do their best at work if we also build their capacities and capabilities," said Nandes, citing areas such as communication, leadership, wellbeing, and sustainability.

To this end, Xero offers online resources for SMEs to overcome both technical and non-technical challenges, he added.

It is important to make time for training, said Labruyere, adding that he personally spends at least 5 per cent of his work time in upskilling himself.

"I don't believe that training should always be boring, (about) things that you are weak on. I think you need to also find things that play on your strengths, things that you enjoy, and alternating is a good thing," he said.

Singapore's digital skills gap was estimated at about 15,000 workers in a 2018 study, said Tan.

While the government has a role in providing support, other stakeholders such as large companies, financial institutions, and publishers of e-learning resources should also take the initiative to help SMEs bridge this gap, she added.

Other than training, companies can also look at hiring skilled workers and outsourcing tasks, Tan noted. "Depending on the nature of your business, focus on the wider issue - what we call comparative advantage, the element of the task that gives you the lowest opportunity cost. Other aspects, you can outsource," she added.

Talking points

Grants for long-term transformation versus short-term handouts

Automation frees up firms to focus on what matters

Supporting vulnerable SMEs

Choosing the right tools for your business