Know that you're not alone. COVID-19 is affecting everyone. It's a bizarre situation nobody could have predicted, and for once we're all on the same page. Nobody wants you to go out of business. Your customers, suppliers, vendors, and lenders are rooting for your survival.
For retail businesses highly dependent on foot traffic, keeping your cash flow steady and controlled is incredibly essential. Shops, restaurants, and bars are part of this group, and with the current circuit breaker measures in place, it is obvious how much these services are hurting. Reduced footfall equals reduced sales, which is why it is crucial to remove nonessential costs during this trying period.
You’ll need cash to improve cash flow. It would, therefore, be wise to cut nonessential costs. Blowing money on team perks or experimental marketing tactics should be put on pause for the moment. By reducing unnecessary expenses, you will have more cash on hand, which could help to alleviate the tight cash flow.
The government has rolled out several measures to boost the survival rate of SMEs.
In light of COVID, the Monetary Authority of Singapore has published a few measures to help ease the financial burdens of SMEs during this dry period.
MAS has partnered with financial institutions in Singapore to help SMEs with lowering their long-term loan payments, and for them to remain insured despite being financially distressed. SMEs should enquire on the relevant costs and benefits before registering for any of the options.
For SMEs with continuous payment of interest and good relations with their banks (not more than 90 days past due as of 6 April 2020), they may apply to their lender to defer principal repayment of their loan until 31 December 2020. SMEs can also extend the tenure of their loans by up to the corresponding principal deferment period if they opt to do so.
Also, SMEs with loans under SME Working Capital Loan and Temporary Bridging Loan Programme can enjoy lower interest rates. Under MAS SGD Facility for ESG Loans, MAS offers lower-cost funding to participating financial institutions to support the lending at lower interest rates to SMEs under the ESG Loan Schemes.
Consider speaking to your suppliers to discuss extended payment terms; especially large-scale suppliers, which are more stable than middle-market companies. Having extra cash for two additional weeks with 45-day terms in comparison to 30-day terms could mean added stability.
You could also reach out to your supplier to request for a small discount in exchange for paying earlier. A one or two percent discount for paying within ten days instead of 30 is a common practice amongst differing industries.
While not all vendors may be able to adhere to these requests, those who are prepared may feel inclined to do so to maintain a good relationship and to avoid a cancelled contract.
While it is challenging to keep your business running during an economic crisis, setting realistic goals and establishing good relationships with your partners and employees will help you tide through it. Being passive is a privilege to have when the economy is booming. In today's context, however, being passive might not be a good idea. Delayed payments make a difference in trying to maintain a steady cash flow.
By having a direct and open discussion about payment terms, both you and your supplier may come to a greater understanding on why payments could be late, leading to an opportunity for a solution to prevent this in future. This transparency between the two of you could even lead to a better business relationship.
Multiply can help your business weather through this COVID-19 storm.
Invoice factoring is a great way to manage cash flow better, especially if you need a small amount to tide through a short period.
Reach out to us at +65 8775 0069 or head over to our website to find out more here.
Factoring involves three parties: business customers, financers, and the service provider.
How factoring works is this: a financer can provide up to a certain percentage, typically 80%, of advanced cash to you, from invoices to business customers that haven't been paid yet. When the invoice is due, the financer may or may not directly collect the payment of the invoice from your customer, depending on the invoice being disclosed or on a non-notified basis.
Any interest or fees will be deducted from the remaining 20% invoice value that was unadvanced previously and returned to you after the financier receives payment from the customer.
SMEs with a customer base consisting of large corporates, listed companies, or statutory boards with extended credit terms will benefit most from this method of financing. Factoring is less strict on credit profiles of the company and instead focuses more on the credit quality of the invoice they are buying over. The only downside is that the financing is only available after goods or services have been sold and are pending payment. In addition, factoring is not considered as debt on your balance sheet.