Your business may be losing money without even realizing it. Here are the top 6 ways companies in Singapore lose out on precious funds.
For SMEs and startups on a tight budget, every dollar counts.
To be sure, most already operate with lean teams because they lack the luxury of a large accounts department, procurement experts, or an army of administrative assistants. But there’s also business spend on cloud services, outsourcing, and invisible spend of all kinds.
This is compounded by the fact that, as a startup grows, it can become more and more difficult to track costs.
Regardless, full visibility over business expenses is an absolute must for any business seeking to scale. In 2017, for instance, The Business Times reported that around a third of 2,500 surveyed SMEs were facing cash-flow issues.
While there are financial services to help with cash-flow, it’s best to begin at the source of the problem. That means controlling and managing expenses to the cent, to ensure money is available when the business needs it.
Young (and older) SMEs and startups alike tend to make similar financial mistakes:
It’s important to address each possible pitfall and take the right steps to reduce risks.
Invisible spend refers to spending costs that are not tracked, such as employee travel expenses.
According to a study by Phocuswright, a global travel market research company, around a third of employees (36 percent) tend to book flights, hotels, etc. that are “out of policy” for the company. This is due to new travel habits that have arisen thanks to an increasingly digital economy.
For example, your company may already have negotiated a discount with a local carrier or hotel chain. But if an employee instead books on a third-party comparison site - perhaps because it gives them bonus miles or cashback - you may end up paying more. Why?
But later, when it’s time to make claims, they request the full price of the travel product. You end up paying more as you don’t have deals with the third-party booking site.
Repeat occurrences by multiple employees may cause your company to lose its travel deal with partners if they see your volume of travel dropping, and leave you with higher expenses.
To avoid the likelihood of this happening, it’s best to adopt automated expense management tools. Tracking invisible spend, for example, becomes much easier with a Spenmo card, which automatically tracks purchase amounts and updates accounting databases in real-time.
As a bonus, automated processes also help you do away with stacks of ring binders during the claims process.
Did you know that, under the Productivity Solutions Grant (PSG), the Singapore government will pay up to 70 percent of your costs for approved productivity upgrades? That applies to qualifying activities in sectors from retail to precision engineering.
Likewise, Double Tax Deduction for Internationalisation (DTDi) comes into effect on the Year of Assessment 2019 - this allows your business up to 200 percent tax deductions (capped at $150,000) for select overseas business activities. These include business trips, joining trade fairs, and expenses of staff posted overseas.
SMEs that don’t keep updated on their governments’ unique grants stand to lose thousands; it’s essentially free money.
You can check out the Singapore Business Grants Portal for updates on the latest support schemes. Make it a regular business practice to look up such grants periodically (e.g. once a month), and apply for whatever help is given.
Office rent costs in Singapore continues to be incredibly high at the time of writing. These amounts are just coming down from around July 2019, when they reached the highest recorded level in 10 years. For many SMEs that are already burdened with high operational costs, rental space could be the final nail in the budget’s coffin.
Fortunately, there are many alternatives to traditional office spaces in Singapore. Co-working spaces provide flexible leases and options like hot-desking - this is more forgiving to SMEs that are unsure of how much their headcount will grow later (traditional offices tend to come with fixed three-year leases, making it hard to move out if the space proves too much or too little).
Likewise, businesses can look into subsidized spaces for certain industries. For example, some incubators and accelerators also rent out space to SMEs in relevant industries.
Practicality should trump appearance for SMEs - there may be more efficient ways to use cash than paying the rent on a Grade A office space. This is especially true for SMEs where clients seldom come to the office (e.g. if your business is a consultancy, you will most likely meet clients in their office instead of yours; there may be no need for a high-profile CBD office).
Singapore is a business hub, and just about every business need - from corporate secretarial services to office cleaning - can be outsourced. SMEs are often tight on manpower, so these services can seem like attractive timesavers.
Unfortunately, though they may save time, they may also cost cash - a lot of it. For example, outsourcing your accounting work may save you money in the short run. However, the fees paid may be too high to justify if the accountant is simply doing two to three hours of work per month (possible for smaller companies).
For simple tasks like tracking expenditures and updating your books, you can also use a Spenmo card for your employees. This can automatically update your records whenever your employee makes a transaction on the card, allowing for real-time tracking and easy analysis.
On the flip side, you may end up paying excessively for billable hours; if so, it’s cheaper to hire an employee and do the work in-house (e.g. if you’re running an ecommerce site, it may be cheaper to have an in-house web designer to handle the near-constant updates, than to outsource each time).
Whatever your financing needs are - be it invoice factoring or a working capital loan - your options are abundant in Singapore. However, every financial institution offers different interest rates and fees; and very often, there’s no advantage to a loan with a higher interest rate.
As such, businesses need to do their due diligence, and at the very least check on comparison sites before applying for loans. For bigger ticket purchases - such as purchasing a property for the business - it’s imperative to consult a qualified mortgage broker, as it’s unlikely you’ll have the resources to compare thousands of loan packages.
SMEs should refrain from just grabbing at the most convenient loan offers (e.g. the first bank to call with an offer), and take the time to make proper comparisons.
A standardized procurement process is not necessarily complicated. For an SME, it can be as simple as requiring quotes from three different vendors for a project; or creating a list of approved vendors for supplies.
A standardized process for company spending and procurement makes it easier to strike deals with suppliers, and ensures that you buy at the best discount you can find. This will also prevent conflicts of interest (e.g. a manager purchasing from a friend’s company), as you can vet the approved vendor list beforehand.
What gets measured gets managed; the best way to control costs and waste less is to have clearly outlined procedures and automated spend management wherever possible.
This reduces the burden of the administrative process on employees (they are more likely to follow procedures if it doesn’t result in 20 minutes of paperwork!). Guess what: this will save you a major headache at the end of each quarter.