Global Business Monitor Report 2017
Global Business Monitor survey by Bibby Financial Services gives insight into the collective cash flow challenges that Asia SMEs face in their markets
HONG KONG, 26 September 2017 – Bibby Financial Services Group (“BFS”), a leading independent financial services partner worldwide, today releases research it has conducted as part of its annual Global Business Monitor Survey. Following on from previous years, this year, BFS has broadened its scope to add additional countries to the mix including Singapore. The survey gives detailed insight in to the disparities between perceptions of the economic environment but also the correlation between the complexities faced.
The survey’s objective is to give a general consensus of SME’s sentiments on topics that focus on the economic and geo political environment in their respective markets, sales performance, perceived opportunities and threats to their businesses and challenges faced. BFS surveyed 150 SMES in each of the 11 markets across Europe, US and Asia, namely France, Germany, Ireland, Netherlands, Poland, UK, US, Canada, Czech Republic, Hong Kong and Singapore.
The findings from this year’s Global Business Monitor give some interesting insights into the differences and similarities between how SMEs in Asia and the other parts of the world view the same topics. Research points to the prevailing pessimism in the outlook for the rest of 2017 and beyond in Asia. In general, 55% of SMEs in all markets are expecting sales to increase over the next twelve months, among which, Canadian SMEs are most confident about future sales with 70% expecting growth. In contrast, just 28% of respondents from Hong Kong’s SMEs expect sales to grow over the next twelve months, and 43% of respondents in Singapore, expecting it to improve in its region respectively.
Despite some of the polarising views among the different markets, the research reveals that collecting payment from customers on time (55%) is the most problematic area for SMEs in relation to managing their businesses’ cash flow. Businesses in Singapore and Hong Kong reported the longest waiting period for payment from customers comparatively among the regions surveyed, each taking 45 days and 41 days respectively. As there is a time gap between having to pay suppliers and receiving payment from customers, it may have a detrimental impact on businesses’ bottom lines in long term. This is an opportunity that BFS has identified, in which its factoring product can be an advantage to SMEs by mitigating the risk of bad debt with credit insurance, and managing the collection process of outstanding invoices on a client’s’ behalf. This is done with discretion and sensitivity, freeing up the client’s time so that they can utilise it elsewhere such as growing the business.
Although there has been a decrease in confidence in the global economic outlook among SMEs, they are still looking for growth and expansion, 91% of surveyed global SMEs plan to further invest in their business in 2017, and they believe finding new market segments (12%) and expanding domestically (12%) are the greatest opportunities for their business. The main sources of funding for businesses are largely down to reinvestment of company profit (43%) or via self-funding (17%).
The use of external finance is still relatively low considering, especially in Asia counterparts, with only 16% of Hong Kong SMEs and 37% in Singapore currently using it. However, there is diversity of viewpoint between the two regions in Asia when it comes to accessibility of finance in the market, 19% of SMEs in Hong Kong view availability as poor in comparison to Singapore where just 9% who feel it is poor. The reasons for barriers to entry range from stringent requirements and compliance, high interest rates and ability to demonstrate viable business projections.
In addition, the challenges on the cost of rising overheads, cost of labour, and cash flow issues that SMEs in both Hong Kong and Singapore are facing may stunt the pace of growth in both markets. Therefore there is impetus for SMEs to explore the long-term use of external finance such as factoring, as a source of stable cash flow. This in turn will enable them to have the working capital to drive organic business growth and minimize the potential risk of bad debt due to in-efficient payment practices.
There is definite upside for businesses in partnering with alternative financial services providers, especially those with an international reach such as BFS in order to support businesses’ growth aspirations both domestically and internationally. Ultimately, this will mean that SMEs will have the support to operate effectively.
Jackey Chu, Managing Director of Bibby Financial Services (Asia) Ltd commented: “SMEs are a vital part of the local economy and wider eco-system. SMEs in Hong Kong are most concerned about the local economy among all regions with 40% of them saying the economy is poor, and just 21% of them view government policies as favourable to their business. It presents an opportunity for government in Hong Kong to review and adopt policies that will help stimulate economic growth for the long-term. We are still optimistic about the outlook for the business environment in Hong Kong, and we are seeing increasing acceptance of factoring as a means of external finance with factoring volume grew by 28% from 2015 to 2016. We expect to see the momentum in growth continue.”
Alan Wong, Managing Director, Bibby Financial Services (Singapore) Pte Limited commented: “This year marks the 5th anniversary of BFS operating in Singapore, and we are seeing good progress in implementing our strategy so far. In 2018 we expect to see loans demands (based on factored invoices) to come from SMEs in manpower supply and construction services sectors. Some of these SMEs could go regional and we will follow them through the provision of cash flow solutions to support their operations.”
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Global Business Monitor Report