Consolidation ahead as SMEs look to increase efficiency

  • Smebiz
  • Monday, 14 Jan 2019

WITH growth expected to slow down this year, SMEs are expressing concerns over tightening sales and profits.

In a recent survey carried out by credit reporting agency CTOS, it is found that small businesses have indicated that maintaining sales and profit margins are the primary concerns for the sector. This sentiment is carried across the board, throughout the distributing, manufacturing, construction and financial industries.

Meanwhile, concern on acquiring new customers is ranked lower.

“With 37.1% of Malaysia’s GDP coming from SMEs, the issues that affect them will undoubtably affect Malaysia as a whole,” said Dennis Martin, group chief executive officer of CTOS Data Systems.

“We are seeing that issues such as pricing and competition are factored much lower down the list, this may mean that the SME sector is looking at consolidating positions in 2019, rather than looking towards expansion.”

Using a sample of SME respondents from a diverse geographical range, CTOS noted that this trend shows that SMEs are shoring up their existing customer base and finding ways to be more productive and therefore profitable in an uncertain environment.

Notably, cashflow issues are the second largest concern, with 37% of respondents highlighting it as a major problem, giving further credence to the theory that SMEs are feeling the financial pinch as larger organisations may be struggling to meet commitments to SMEs.

At the other end of the spectrum is ‘government policies’, of which only one fifth of SMEs are concerned about.

“The lack of concern over government policies in comparison to financial drivers such as profit margins and cashflow issues can be taken as a generally positive note,” reasoned Martin.

The recent 2019 budget has allocated a total of RM17.94bil for SME development this year under the new government’s third focus, which is to foster an entrepreneurial economy. Among the key initiatives include financing, Industry 4.0, export, tourism, agriculture, entrepreneurship, human capital development and incentives.

“With support on a national level, SMEs are finding that they are able to concentrate on doing business regardless of the effects of potential governmental or regulatory issues, which correlates with our survey findings.

“This survey and the ensuing increased understanding of the wants and needs of our SME clients will allow us to better serve them going into 2019, with our suite of services tailoring towards efficiency in all aspects of business, be it improving cashflow, through improved collections or increasing profit margins through reducing bad debts,” said Martin.

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Business , CTOS , SME


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