Financial management has always been a regular concern for companies in all sectors. For small and mid-sized businesses, this is even an issue of survival. Findings from the annual SME Development Survey conducted by DP Information have shown an increase in the number of SMEs experiencing finance-related problems. Poor cash flow management is believed to be the main contribution to the failure of many small companies.
Downsizing the business by closing down branches, production lines and reducing workforce are the short-term solutions SMEs have used to protect their businesses. How are you managing your business on a limited budget? Here is some advice that everyone should know.
1. Maintain product quality
The first and foremost principle is to continue to offer the same high-quality products that you have been selling to customers from your earliest days. The fact is that, in order to lower expenditure, many SMEs switch to lower-cost materials/ ingredients or cut down on steps in their operational processes. Inferior quality products will soon be felt by your customers, which destroys customer’s trust and will further dampen your business by causing your regular customers to change suppliers.
Instead of shifting to inferior materials, try negotiating with your suppliers or find other suppliers who provide similar-quality products at lower price levels. You can also contact experienced specialists in the field to see if there are other methods to speed up the operation process or lower the production cost.
If the above method does not work for your company, you might need to consider increasing your product prices. However, do investigate market prices first and if needed, think of a reasonable way to disclose the explanation to your customers sincerely. As long as you can guarantee the quality of your product, your business still has the potential to flourish.
Another strategy to grow your business is through product bundling. Adding “free” value-adding for customers such as free consultancy or a free trial is not a bad idea as well. Offering customers attractive deals may raise their incentive to buy as they feel that they are getting more benefit from the purchase. However, make sure to investigate and plan out your strategy to avoid incurring heavy costs.
2. Optimize customer’s experience
There is a saying that a satisfied customer is the best business strategy of all. It is important to attentively put yourself in your customer’s shoes to visualize what they need, and adjust your products/ services from time to time. Since there is nothing better than hearing feedback directly from your customers, you can establish a Customer Satisfaction Investigation (CSI) team to collect customers’ feedback so that you can identify unique problems and resolve them in time.
Offering promotions and discounts to customers is an approach to extend customers’ satisfaction. Instead of blasting the news to the entire list of customers at once, sending out individual messages will make them feel more special and raise their incentive to consider taking part in the promotion.
It is crucial to establish basic customer service regulations for all employees to follow. Putting more effort into creating customer pleasure can become your competitive advantage as it helps you achieve clients’ loyalty, as well as build a referral source for your products/ services.
3. The market in “low-priced” platforms
The most cost-effective method is word-of-mouth marketing. A satisfied customer telling their acquaintances about your products/ services is more valuable than conducting any other types of ads campaigns. Thus, if you have always endeavored to optimize customers’ satisfaction, developing a referral program can strongly enhance your business marketing.
As the digital marketing is flourishing, make use of the power of social media to expand your ads’ exposure to the targeted customers. LinkedIn, Facebook, Twitter, Pinterest and YouTube are the common social media communities that many companies choose to market their products/ services in. The key is to investigate each platform thoroughly before starting a campaign. For example, knowing which media that is most attractive to teenagers/ parents, male/female, or the time of day that most people use that media will help you make use of social media marketing more effectively while keeping to your budget.
Another low-cost approach to promote your brand is to attend local conferences such as charity events, lectures, and educational seminars, depending on your business specifications. If you have some budget to spare, co-hosting or hosting an event yourself is ideal to reach potential customers.
4. Improve financial management
Spring Singapore’s SME Financing Survey (Dec 2017) indicated that more than 60 percent of SMEs were experiencing payment delays, which is the main cause of their financial problems. SMEs’ debt payment behavior is another reason which worsens their situation, as Mr. Lincoln Teo, the chief operating officer of DP Information Group, noted that “banks and institutions have become more cautious about lending to SMEs”.
In fact, many SMEs do not have a formal bookkeeping or archival system as they believe their business size is small enough to monitor effectively without any technology. However, during actual operations, mistakes and errors can slow down your business and cause a lack of transparency leading to severe financial problems afterward. Besides, the overall picture of your company’s finances cannot be seen clearly enough to figure out where to trim excessive costs.
The lack of controls, policies and standardised management can be avoidable if SMEs understand the importance of financial management. One of the solutions that organizations can consider is using an Enterprise Resource Planning (ERP) software, which can provide full control of your finances by automating your operational flow.
5. Apply for government grants to acquire new technology
Do you know which government grants your company can apply for? The Singapore Government has been offering several grants supporting Singaporean businesses in improving productivity and developing competitive advantages through digitisation. In 2017, more than 50% of SMEs have adopted an innovative technology to streamline their operations, which not only boosted their profits but also resolved manpower issues resulted from the tight labour market.
Before becoming long-term ERP system users, many SMEs were hesitant to make the investment on technology because of the high costs. However, the software is web-based as well as on a cloud-based platform, so less money needs to be spent on hardware. Companies will be provided with IT support from the system provider, which also removes the requirement of hiring more IT employees while you are on a budget. At the lowest cost, the integrated ERP system can help your company evolve and facilitate automation in all sections of your business including Sales and Delivery, Procurement, Manufacturing, Financial Management, Human Resource Management as well as Business Analytics.
Being on a tight budget is a challenge that every company will experience at least once in the lifespan of the business. Depending on your organisation’s scopes and goals, you can take up the above-mentioned tips and strategies to improve your cash flow and maintain your company’s market competitiveness. Government funding is a timely aid for Singapore SMEs to acquire technological software such as an ERP system at an affordable price.