Cash Flow Challenges

Published on 20 May 2020

“Everything was going well with my business and then the costs started piling up,” says Alicia Koh. “All of a sudden I realised I had to change the way I ran my business - or I wouldn’t have a business left to run.”

As a successful interior design business owner whose six-year-old company employed 18 people, Koh was juggling up to 70 home makeover projects at any one time. Her business had almost doubled in size every year since its launch because of her highly successful model, catering mainly to expats who arrived in Singapore without furniture and needing help to source beautiful décor in a hurry.

“The business model was solid,” she adds. “We got a lot of referrals and I thought we were making a healthy profit on every project, so I was reinvesting heavily. I started buying furniture of our own that we could hire out to clients who were only planning to stay for a few years.”

While the fundamentals were right, however, Koh’s business suffered in a way many successful enterprises do: it grew so fast the processes could not keep up.

“We didn’t track our expenditure through each quarter, we just recorded invoices as we received them and tallied up our costs against our revenues every three months,” recalls Koh. “We thought we had a sense of how much we were spending but then the invoices started flying in for all sorts of things that we hadn’t factored in.

“Our phone bills were soaring. Staff were taking clients to lunch and then taking three months to submit their expense claims. We were spending too long on projects, which was making them unprofitable and I’d been too busy to notice.”

The situation became so extreme that in one quarter, Koh’s business went from an 18% profit to a 10% loss. This forced her to change the way she ran her company overnight.

As a bank that supports small and mid-sized companies right across Asia for more than 60 years, Maybank knows this kind of story is – unfortunately – quite common.

“It is really not easy for entrepreneurs,” says Elina Yeo, Head of Business Development, Maybank SME Banking. “We are lucky to work with a lot of them from that exciting first day, when they register their business, and we see how busy they are doing everything themselves until they can hire some help.”

She adds that busy entrepreneurs generally known to watch their cash flow – to make sure they have money in the bank to pay their bills – but are sometimes simply too busy to track their expenditure. Because supplier invoices can sometimes take three months or more to be submitted, a company that is only monitoring cash flow may see sales coming in and bill payments going out, falling into the trap of believing they are making more profit than they really are.

As part of Maybank’s client-centric approach, the organisation partners digital vendors for the Start Digital initiative by Enterprise Singapore (ESG) and Infocomm Media Development Authority (IMDA). With this, Maybank offers SME clients technology-based solutions in cash flow management.

“We help small companies realise that it’s not enough just to know how many bills they have received in any one month,” adds Ms Yeo. “They also need to know how many bills they haven’t received, which are due to come in. If you’re not aware of all the bills that are yet to land in your inbox or mailbox then you can’t be sure of how well things are going.”

It’s often only when business owners speak to their bank about a loan or overdraft facility that they see an accurate picture of their financial position.

“We are a true partner to all of our customers, that is our differentiator,” she concludes. “We help SMEs to think through all their costs. The questions we ask can lead to ‘lightbulb moments’ when they realise just how much it is costing them to run their company.”

Small businesses can now access a range of technology tools and platforms to make cost tracking easier. Platforms such as Financio offer simple purchase order systems designed for small businesses, with accounting entries and tax records generated automatically for each recorded transaction.

Alicia Koh’s company built their own basic system using just one shared document that allowed everybody in the team to track every cost they were incurring even before the bills came in as they subscribed to Maybank’s platform.

“I’m just pleased to be able to manage my team’s spending well and retain a healthy cash flow for my business.” says Koh.

Key take-outs:

  • Make sure you know how much you are spending on your business every month and don’t forget that a lot of bills can come in late, which can make you think you are making more profit than you really are.
  • Maybank can help small businesses to establish an accurate budget, to work out exactly how much they are spending each month so they can predict costs more accurately and spend only what they can afford.

If you like this article and wish to know more, connect with us here.

To help SMEs tide over this challenging period, Maybank, as Asia’s leading financial institution since 1960, offers SME Loan Repayment Relief Package and provides support to Medical Care and F&B Merchants. Click here to find out more.



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