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Introduction

Cash flow is the amount of money coming in and out of the business. It is a great indication of an entity’s liquidity or its ability to short term obligations. Positive cash flow in the form of cash sales and collections means that the incoming cash is higher than what is going out like purchases and payments. A shorter cash flow cycle or the amount of time needed for a business to convert assets to profits indicates robust profitability. Accounting services in Singapore include cash flow audit and design to improve liquidity and profitability.

The goal is to sustain a positive cash flow at a shorter cash flow cycle. However, the cycle is also dependent on one’s business model and operations. The time between spending cash in making the purchases of raw materials to collections on sales is not totally controllable. But, there are ways we can liven up sustained positive cash flow.

1. Improve collection processes

A significant amount of your cash inflow could be stuck in cash receivables. These liquid assets can easily turn bad and hold up your access to cash. Take a closer look at your Accounts Receivables (commonly known as Trade Debtors). How long is the average collection? Do you see a lot of overdue accounts? Give incentives to good clients and early payors and apply more aggressive collection efforts to delinquent accounts. You may also have to cancel the bad accounts.

2. Keep a closer eye on expenditures

Review your expenses. Check on the items that take a chuck of your expenditures. You might want to find more affordable alternatives or shift to better suppliers. Also, take a look into the smaller items, many of these are avoidable like the interest expenses and penalties.

3. Improve sales campaigns

Call on your sales team to boost their marketing efforts. Are your marketing campaigns still relevant and effective? Is your packaging outdated? Discounted sales and promotions are great at driving up sales, but could negatively affect profitability. Review your customers’ buying patterns and behavior. Do you have more repeat customers or complaints?

4. Open new markets

Widening your customer range will bring in more buyers and improved sales. There are plenty of ways to open new markets – branch out to a new market segment with different products, develop new products relevant to your existing ones, open stores in new locations, or open an online store to capture the online market.

5. Manage inventory

Inventory is ready-to-sell items that are kept in the warehouse. They are liquid assets stuck in storage. Furthermore, keeping your inventory safe costs money, which adds your expenses. Good forecasting and inventory management will ensure enough goods at hand while keeping the warehousing expenses at a minimum.

What Affect Company’s Cash Flow

A business, economic, or environmental crisis can throw off even the most careful and intensive business planning. Natural disasters and unforeseen events are unpredictable and immeasurable. Although we can set aside funds and prepare procedures in preparation for it happening, we cannot fully assess its effects on the business.

In any business crisis, there are several ways we can quickly implement in order to sustain positive cash flow and save the business.

1. Injecting fresh capital

Find new investors who can bring in new capital to the company. Owners can also add in new financing to ensure liquidity and continued business operations.

2. Emergency loans

You can secure term loans to carry the business over the rough patch. Your business bank can offer quick business loans at reasonable interest rates.

3. Discounted Sales

Converting liquid assets to cash through discounted sales is a good way of bringing in badly needed cash. It will also eliminate old stocks and slow-moving items.

4. Government Aids

Governments often provide a helping hand during economic disasters and business crises. In Budget 2020, Singapore Government has announced relief measures to help businesses tide over the trying times. Any business entity can claim for government help, provided that they fulfill the key eligibility criteria. Here are the few statutory bodies and organizations in Singapore that help companies to cope with the company cashflow during this coronavirus crisis:

a. “Helping Our Promising Enterprises” (HOPE) Fund

S$5-million was launched through the partnership between Singapore Business Federation Young Business Leaders Network (SBF-YBLN) and Goldbell Evolution Network (GEN) to provide an accessible short-term working capital loans for local SMEs. Each company can take a fixed quantum of S$50,000 with a tenure of 12 months, at a minimal administrative fee. The affordable interest rates range from 0.5% to 0.75% per month. The funding is secured over the personal guarantee of the company’s directors or shareholders. The allowance to defer the first loan repayment to start from the third month onwards is the HOPE Fund’s attractive feature.

b. Enterprise Financing Scheme – SME Working Capital Loan (EFS-WCL) by Enterprise Singapore

The loan quantum capping is increased to S$600,000 from the previous S$300,000 and the life-span’s extension to March 2021 enhance the previous scheme to help in financing a company’s daily operational cashflow needs for the unexpected COVID-19 challenge. Despite that the risk-share is also increased, the standard loan recovery procedure remains. If the company has an on-going overseas project, the management may also consider the Project Loan scheme.

c. Singapore Budget 2020

Generous provisions in the Budget 2020 were set to provide for the different needs of households, workers, and businesses affected by the pandemic COVID-19. The obligations to pay are reduced through these useful schemes such as the popular Corporate Income Tax Rebate, Property Tax Rebate (up to 30% of the property tax payable) and one-time offset for 3 months of staff wages under Jobs Support Scheme. The enhanced Wage Credit Scheme gives 20% of co-funding for salary increments in 2019, which is higher than the rate for 2020. This is a valuable benefit as a result of a past event. Additional support is also available to help the industries affected by the coronavirus – tourism, aviation, food and beverage, retail, and point-to-point transport services.

d. Temporary Bridging Loan Programme (TBLP) for Tourism Sector

TBLP, an additional cashflow support for local SMEs in the tourism industry, is a newly-introduced measure. Eligible enterprises can obtain loans, from participating financial institutions, of up to $1-million, with the interest rate capped at 5% per annum. It is open for application till March 2021 and the maximum loan tenure is 5 years.

e. DBS Relief Measures and Support

DBS Bank Limited understands that managing the cash flow needs is the top priority of every company. Besides being one of the participating financial institutions under TBLP, the other short-term liquidity relief measures and initiatives offered by DBS include but not limited to:

• DBS customers with existing secured property loans would only need to service the loan interest for the next 6 months, upon effect.
• The due dates for import facilities will be extended up to 60 days.
• Rebates are offered for certain bank services.
• Small business loans (up to S$50,000) can be obtained within 1 working day upon loan acceptance, without the need to submit any financial report.

Singapore Finance Minister will deliver the supplementary Budget on the coming Thursday, March 26. The supplementary measures are additional support to assist households, workers and businesses in surviving through the coronavirus outbreak. We will share the business-related measures in our Facebook and LinkedIn pages. Stay tune!

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