Managing Cash Flow for SMEs in Singapore: It’s Not Just About Making Money
Running a small or medium-sized business (SME) is tough – especially in those early years when you’re spending a lot to get things going. It’s easy to think “If we make a lot of sales, we’ll be doing great!” But cash flow is a whole different beast.
Think of cash flow like your business’s bank account. It’s the money coming in and the money going out. You can figure it out by adding up all your income and then subtracting what you pay for everyday stuff, investments, and any loans.
A lot of new business owners think good sales automatically mean good cash flow. Unfortunately, that’s not always true. There are a bunch of other things you need to do to keep your business’s bank account healthy.
If you’re an SME owner, here’s a quick guide on how you can manage your cash flows.
Cash Flow for SMEs: Practical Tips to Keep Money Flowing
Let’s be honest, managing money in a small or medium-sized business can be a real headache! Here are some down-to-earth ways to keep your cash flow healthy:
1. Keep Business Money and Your Money Separate
It might feel tempting to dip into your business account for a quick takeout or treat yourself to those shoes you’ve been eyeing. But here’s the thing: when money gets jumbled up, it’s impossible to figure out if your business is actually profitable.
Come tax time, untangling things is a nightmare. A dedicated business account makes accurate bookkeeping possible and avoids potential headaches with tax authorities.
Think of it as protecting yourself. If something unexpected happens with your business, having a separate account helps shield your personal money.
2. Check Your Bank Statements Regularly
Bank statements may be boring, but they’re packed with important info. Think of them as clues about hidden fees or mistakes that can cost you money.
Take 15 minutes each month to review your statements. Grab a coffee, get comfy, and look for anything unusual. You might catch things you didn’t even know about!
It’s like giving your business finances a quick checkup. Catching problems early makes them way easier to fix.
3. Invoice Like A Boss
Invoices aren’t about begging, they’re about getting paid for your hard work. Send invoices immediately after finishing a job – don’t let clients forget.
Set clear payment deadlines (“Due within 14 days”). This helps you follow up confidently.
Late payment? Send a friendly reminder, then escalate to a phone call if needed. It’s your money, don’t be afraid to chase it!
4. Make It Easy for Customers to Pay
Nowadays, people expect convenience. If paying you is a pain, they’ll put it off, simple as that. Your cash flow suffers.
Offer online payment options – many tools let customers pay with a click, no hassle.
If old-school checks are still a thing for you, include a pre-addressed envelope. Tiny things like this remove that extra barrier to payment.
Think like your customer: Is paying you smooth and painless, or are there unnecessary hurdles?
5. Don’t Rush To Pay Your Own Bills
If you can pay your bills on time without getting hit with late fees, that’s perfectly fine! Paying early just hands your hard-earned cash to someone else sooner.
Keep that money in your own account a little longer. It could be the difference between having enough for a big order or feeling stressed and short on cash.
Just be sure to keep track of due dates so you don’t damage your credit score with late payments.
6. A Loan Can Be Your Friend (If Used Wisely)
Think of a business loan like a handy tool. Don’t wait until you’re desperate and have no options – that’s when you get bad deals or can’t get a loan at all.
Secure a loan before you need it. That way, you have cash ready for a broken machine, a sudden big order, or a cool opportunity to grow your business.
Remember, loans are meant to help you make more money, not just patch up holes. Be smart about how you use them!
Read also: Business Loan In Singapore: How Can Invoice Financing Help Your Business?
7. Find a Bank Account That Works For You
Not all bank accounts are created equal! Some earn you a little extra interest just for keeping your money there – why not take advantage?
Look for accounts with low fees and perks that actually matter to your business (like easy online transfers).
It’s worth putting in a little time to shop around. It can save you money in the long run.
8. Accounting Doesn’t Have to Be Scary
Numbers can be intimidating, but they tell the story of your business. You don’t need to be a financial whiz to benefit. Even simple systems like using of a spreadsheet or a calculator can show you where the money is going and help you spot areas to save.
If you really hate numbers, consider getting a little help from a bookkeeper or accountant for a few hours a month. It may be more affordable than you think!
9. Build That Emergency Fund
Stuff happens – a surprise repair, a slow month, having an emergency fund takes the stress away.
Even saving a little bit consistently adds up over time.
This isn’t just about surviving bad times, it lets you jump on good opportunities when they come up (like getting a bulk discount or expanding into a new market).
10. Cut Costs Without Cutting Corners
Can you negotiate deals with suppliers? Absolutely! Building good relationships with suppliers can open doors to discounts, longer payment terms, or even freebies. Bulk purchases or long-term contracts can strengthen your bargaining power. Remember, even small savings per item add up significantly over time.
Switch to cheaper software? Definitely consider it! There’s a huge range of affordable or even free software solutions that rival expensive industry-standard tools. This can save thousands each year on licensing fees.
Small savings add up fast, boosting that bottom line. This is so true! A few dollars saved here, a little streamlined process there – those small actions become a powerful boost to your profitability. Here are a few more cost-cutting ideas for SMEs:
- Consider leasing or choosing used goods when buying equipment: This lowers upfront costs and can even come with tax benefits. Look for reliable secondhand suppliers specialising in the equipment you need.
- Do regular maintenance and repairs instead of replacement: Proper care extends the life of your equipment, delaying expensive new purchases. A preventive maintenance schedule is a worthwhile investment for SMEs.
- Unless necessary, work with open-source software: Many powerful business tools are completely free and offer customisation options. If it meets your needs, open-source software is a massive cost-saver.
- Outsourcing instead of hiring permanent employees where possible: For specialised tasks or fluctuating workloads, outsourcing can be more cost-effective than in-house hires. This cuts down on payroll, benefits, and office space expenses.
The Bottom Line
Managing cash flow isn’t just about making money – it’s about keeping what you’ve earned and using it wisely.
Think of cash flow like energy – your business needs a steady flow to function properly! Sure, some of these tips might seem small, but those little changes make a huge difference. Track your finances diligently, protect your cash flow, and watch your business thrive, not just survive.
Remember, being a successful SME owner isn’t just about brilliant ideas. It’s about the day-to-day habits that protect your hard work and give you the freedom to grow.
You’ve got what it takes! Now get out there and make that money work for you!
Looking for business loans in Singapore? Reach out to Capitall and speak to our friendly financial consultants today.