Cash flow is the heartbeat of any business, especially in the early stages of growth. You can have the best ideas, perfectly executed, but when the lifeblood of working capital runs dry the effects are devastating.

The challenge cannot be overstated: research shows that delayed payments and chasing overdue invoices are the two biggest productivity drains on small business owners in Singapore. Around 90% of SMEs have clients who don't pay on time and as a result nearly 40% experience cash flow issues.

"Cash flow problems can arise unexpectedly and when they do it can be very difficult for business owners to secure access to working capital at short notice", says Elina Yeo, Head of Business Development of SME Banking at Maybank Singapore.

"We encourage businesses to speak to us early on – before their need for working capital is critical – so we can take them through the options that are best for their business and put processes in place that give them peace of mind."

Working capital challenges come about partly because of a core disconnect between small businesses and the larger companies they often supply. While bigger operators can have payment cycles of up to three months, SMEs tend to be supported by staff or suppliers who need to be paid monthly.

Worse still, this discrepancy can end up punishing success. If a small business is growing fast, cash flow challenges are magnified by the invoice settlement lag, meaning unless overheads are low and margins high, difficulties are inevitable.

Maybank advises SMEs to address their funding needs by considering two different scenarios: short term events that need fast cash solutions and long-term working capital structures to help them ride the inevitable ebbs and flows of commerce.

Companies can take out various lower cost, long-term loans, such as on Commercial Industrial Property or by mortgaging assets.

Where short term challenges apply, companies may choose to rely on an overdraft (OD), Term Loan (TL), Trade Lines or revolving credit facilities. Each works slightly differently and each has pros and cons.

Maybank advises clients according to their needs. A good example is a company looking to improve its short-term cash flow to fund an inventory purchase to be sold over 3-6 months. In this case trade instruments would be preferable to a long-term loan and could deliver savings of up to 4% per annum.

On the other hand, if companies find themselves with excess cash, advisers can help them to maximize returns through money market instruments, such as time deposits, which pay interest over a set period of maturity.

In Singapore, SMEs have access to grants to help them maximise the benefits of going digital. As announced in the 2017 Budget, the SMEs Go Digital programme aims to help SMEs use digital technologies, build strong digital capabilities and participate in the Digital Economy.

Backed by a U.S.$75 million fund, it is focused on industries where digital transformation can drive productivity and streamline processes; specifically, retail, food, wholesalers, logistics, cleaning and security. The goal is to transform Singapore into a Smart Nation in which SMEs can increase efficiencies and improve cash flow management.

Establishing a robust solution to one's cash flow challenges has benefits far beyond business owners. Effective cash flow not only allows those who run SMEs to sleep at night, it also allows them to grow, employing more staff and paying more tax in the process. Singapore's government calls SMEs 'the heart of the economy'.

With the peace of mind which comes from knowing there is cash available when needed, entrepreneurs are free to invest in growth and to focus their efforts on forging ahead.

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