SMEs can tap digitalisation, grants to mitigate rising costs: business leaders

AS SMALL and medium-sized enterprises (SMEs) in Singapore grapple with rising costs, they should consider adopting digital tools and making greater use of government schemes to mitigate these costs, said business leaders at a post-Budget webinar on Tuesday (Mar 14).

By doing so, SMEs can also lay the foundation for a more productive and efficient business, which is crucial in today’s volatile and uncertain macroeconomic environment, said panellists at the Xero Community: SG Budget 2023 event hosted by global small business platform Xero and the Singapore Business Federation.

“Digital solutions are critical to business survival and staying competitive in what’s frankly an incredibly competitive environment,” said Koren Wines, managing director of Xero Asia.

“SMEs can also combat rising costs in the longer term by innovating to provide higher-value products and services and venturing into overseas markets with greater margins,” said Soh Leng Wan, assistant chief executive of Enterprise Singapore.

Getting government help

SMEs who have yet to embark on digitalisation can tap government schemes like the Start Digital initiative and the Productivity Solutions Grant (PSG) to kickstart the process, said Wines.

The Start Digital initiative supports SMEs in building foundational digital capabilities, while the PSG provides financial support for business owners to adopt pre-scoped IT solutions, equipment and consultancy services to enhance productivity.

One avenue of digitalisation is adopting cloud-based accounting tools, said Wines, as these provide “greater clarity and visibility” over a business’s finances.

Automation features in such tools can reduce the likelihood of error, and streamline time-consuming processes, she added.

Another scheme discussed was the Energy Efficiency Grant (EEG), which provides funding for the implementation of pre-approved, energy-efficient machinery by SMEs in the food services, food manufacturing, and retail sectors. In Budget 2023, the EEG was extended by a year till Mar 31, 2024.

Energy costs have been rising “quite substantially”, said Chua Ee Chien, managing director of Whimsical, which runs restaurants Jekyll & Hyde and Graft.

Over the past year, his restaurants’ electricity bills have risen by up to 60 per cent, which makes adopting the EEG an attractive proposition, said Chua: “Anything that you can use to reduce costs for small businesses right now, it’s especially important.”

From the government’s perspective, grants and financial incentives aim to serve as a catalyst for future growth, and help SMEs “de-risk” certain long-term investments, said Soh.

The de-risking element is especially important to SMEs as they pursue growth, said Soh, as “there’s no 100 per cent certainty when you undergo innovation, (and) there’s no 100 per cent certainty when you enter new markets”.

The digital advantage

SMEs can use digital tools to garner insights from real-time data, and thus identify opportunities for innovation, said Wines.

She cited the example of online Japanese gourmet grocer Zairyo, which received a surge in orders during the “circuit breaker” period of the Covid-19 pandemic in 2020, when dining out was not possible. Zairyo was able to meet demand thanks to real-time sales data collected via Xero’s digital solutions.

“Had they not had that technology stack in place, that sudden and seismic change to their operating environment would have left them in gridlock and they wouldn’t have been able to adapt and be nimble,” said Wines.

Chua noted that for a small business owner with a lean team, digital tools not only allow for a simpler workflow for employees, but also greater clarity of a business’s cash flow.

“If you don’t utilise technology … unless you’re very meticulous and tying that to an abacus, I think you might have a bit of an issue,” Chua said.

Obstacles to innovation

“But one challenge that SMEs face in innovation is that of budget constraints,” said Chester Leong, managing director of accounting and tax services provider BoardRoom Group.

To that end, it is important for SMEs to be mindful of their long-term goals and the kind of return on investment they want to achieve, before they can work out the budget that they need, Leong said.

Another is that SMEs may not know how to embark on innovation due to a lack of in-house expertise, said Soh. Such SMEs can approach Innovation Partner for Impact, a subsidiary of Enterprise Singapore, for assistance from industry experts, he added.

The shortage of talent is a significant constraint – particularly tech talent, where job market demand is outpacing supply, panellists said.

Said Wines: “Technology has levelled the playing field for SMEs, creating exciting and unique opportunities for them to grow.

“To make the most of it, businesses need people who are willing and able to implement and use tech to its full potential. These are the skills and mindset we’re seeing in high demand.”

“From a solution perspective, there is no silver bullet,” said Soh. Apart from increasing supply through the education system, the government is helping workers move into tech roles from other industries, he added.

To nurture their own talent, SMEs can tap on the SkillsFuture Enterprise Credit scheme, Leong said, which funds enterprise and workforce transformation initiatives.

Digital tools also allow SMEs to optimise their workforce, said Wines, as the automation of repetitive or time-consuming tasks will free up employees for more critical assignments. Talking points

Simple actions SMEs can take immediately to become more resilient

“Cashflow is universally a key priority for SMEs who tend to run on much lower margins compared to larger enterprises. Digital technologies, like PayNow and InvoiceNow, have been strong enablers: increasing business productivity, facilitating faster payment times and improving cash flow. Implementing these type of solutions is a no-brainer for businesses.” Koren Wines, managing director of Xero Asia

Job redesign efforts

“We have trained more than 12,000 individuals into tech jobs, and upskilled another 160,000 through tech courses and certifications. This is an effort which the government will continue to work on … which requires all partners to come together from the company’s perspective to (think of) how they can redesign jobs and how they can change some hiring preferences, so as to allow more newcomers to join the industry as well.” Soh Leng Wan, assistant chief executive of Enterprise Singapore

Keeping up with finances

“When you’re not clear about your cash flow, you’re not clear on revenue, your costs, et cetera – and all that creeps up on you, and can actually be not just detrimental to your business, but can actually destroy your business. You really need to be able to keep abreast of that.” Chua Ee Chien, managing director of Whimsical

Sustainability efforts by SMEs

“We believe in the next few years, more businesses around the world will see the need to integrate environmental, social, and corporate governance factors into their business plans. And this will be a request from the investors, their stakeholders, or sometimes even the banks, as (the SMEs) seek sustainable financing.” Chester Leong, managing director of BoardRoom Group

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