ED 47: January-February 2013

30
mo n E ysm a r t
Will 2013 Be A
TumulTuous
YeAr?
How SMEs can ride through a year
of falling consumer spending and
business confidence.
Small and medium enterprise
(SME) owners are approaching
2013 with caution. 2012 was
a challenging time for many,
and it seems like 2013 will
bring its own brand of obstacles that
SMEs need to hurdle.
The global economic outlook for 2013
has weakened over the past six months,
following a series of downward revisions
across both developed and emerging
markets. In the recent Economic Outlook
report released by Atradius, global
growth is expected to be 2.8 per cent in
2013, slightly up from 2.6 per cent this
year. While global growth is expected
to pick up slightly in 2013, risks to the
outlook are still significant: an escalation
of the Eurozone crisis, further moderation
of growth in emerging economies and an
increase in oil prices could individually or
all together undermine global economic
growth.
Singapore, as one of the most open
economies in the world, is highly
vulnerable to adverse global economic
developments, such as the unfavourable
economic developments in Europe,
the moderating growth in China and
the United States’ slow steps towards
recovery are weighing on its growth
prospects. Some of this lost growth
momentum, however, is at least partly
Ja n | FE b 2013
En t r E p r E n E u r s’ Di g E s t
offset by growing trade in the South
East Asian region. Economic growth is
projected to be 2.2 per cent this year,
accelerating to 3.8 per cent in 2013. But
with rising business costs, operational
concerns, and weak economic activity,
Singapore SMEs are not immune to
payment risks.
unpaid invoices increasing
Atradius’ 2012 Payment Practices
Barometer report, which tracks the
number of uncollected invoices in
Singapore, shows that local small
enterprises are struggling, and struggling
hard. 5.1 per cent of domestic and 6.1
per cent of foreign business to business
(B2B) receivables from SMEs were more
than 90 days past due, higher than the
overall country average of 4 per cent.
The reason: insufficiency of funds, a
problem cited by many companies in the
wholesale, retail, and distribution sector.
This is the last thing that Singapore
SMEs need, many of which have been
dealing with a tight labour market for the
past years. Many small firms foresee that
the situation will not change in the near
future, and it may even worsen.
Mitigating payment risks
When a business owner becomes
obsessed with meeting quotas and
acquiring new clients, he forgets that not
all buyers have the ability to pay on time.
The pursuit becomes a business leader’s
ultimate goal. But take a step back and
think: is this client worth it?
Before pursuing a client, it is wise to
assess the prospective client’s credit
worthiness. Companies can engage an
independent credit vetting agency, or they
can assess a buyer’s worthiness on their
own using publicly available information.
Assign one of your staff to research the
company’s history, reputation, and if there
are any pending cases against them. If
the company you are pursuing has had
any questionable dealings in the past, it is
easy to find a press article to prove it.
Another way to research is to call one
of the company’s current or former
suppliers and partners. Ask if the
company in question has defaulted in the
past, and how long it took to settle their
obligations.
If background checks proved that the
company in question has been faithful
in paying its suppliers, make sure that
terms and conditions (T & Cs) are strictly
adhered to. Make sure that these T & Cs
are up to date, and that the customer
knows this and has agreed to follow
it. Ask a qualified legal professional to
prepare and verify the T & Cs. He should
also ensure that the T & Cs reflects the
legal practices for credit terms in your own
country as well as the buyer’s country, if
they are located overseas. Finally, ask the
buyer to sign a contract where these T &
Cs are written clearly.
The next step is to employ a credit
collections agency. These agencies are