Accounting & Cash Flow Management For SMEs in Singapore | OCBC Business Banking SG
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Get Clarity and Confidence in Your Cash Flow Management

Get Clarity and Confidence in Your Cash Flow Management

  • 03 July 2019
  • By OCBC Business Banking
  • 5 mins read

Cash flow is the lifeblood of any business. If you’re successful in managing your cash flow, chances are your business will also be successful.

Of course, this is easier said than done, especially if you run a small business. An end-2017 survey on SME financing by SPRING Singapore showed cash flow management continues to remain a huge issue facing Singaporean SMEs. In particular, the survey revealed:

  • 64% of SMEs were facing payment delays from customers
  • 60% of SMEs that applied for external financing did so to manage their operating cash flow
  • Delay in customer payments was their number one finance-related concern

This is far from a local issue. A survey by Intuit QuickBooks found that 61% of small businesses worldwide ‘regularly struggle’ with cash flow. Further, the average small business in the US and UK is owed US$53,000 (S$73,000) and £25,000 (S$43,000) in outstanding account receivables, respectively.

Beyond their obvious economic consequences, poor cash flow management can also lead to legal ramifications.

Potential Legal Consequences of Poor Cash Flow Management
According to the same survey by Intuit QuickBooks, 43% of US small businesses with cash flow issues were at risk of being unable to meet employee payroll. As labour costs are often the largest single expense for small businesses, it is easy to see how this can happen.

However, in Singapore, this can result in severe penalties — a fine of up to S$15,000 and/or imprisonment up to six months. The Ministry of Manpower takes this offence seriously and has both fined and jailed errant employers.

Common Mistakes That Worsen Cash Flow Issues


Some aspects of cash flow management, such as your customer being late on payments because of their own cash flow issues, are beyond your control. Even when you exclude these, many small businesses still make common mistakes like:
  • Over optimistic sales forecasting
  • Impulsive spending
  • Not having an emergency stash for a rainy day
  • Poor follow up on past-due receivables
  • Not tracking cash flow

Again, avoiding these mistakes is easier said than done — running a business is a complicated affair, after all.

But if you can distil the complex workings of your business into organised and actionable data, you can make better business decisions – period.

Accounting software can help you do this effectively.

Manage Your Cash Flow Using Accounting Software Designed for Small Businesses
Small business accounting software has exploded in popularity in recent years. Specifically designed to meet the needs of small businesses, they are a great way to stay on top of cash flow management.

The three top choices on the market today are QuickBooks, Xero, and Wave. While they are all cost effective, there are a few distinctions which might make one or the other a better fit for your business.

QuickBooks
QuickBooks might be the most popular choice for small businesses worldwide. It is generally rated to be the most robust accounting software, with its ability to create customisable reports and invoices being highly lauded. It also allows you to track employees’ time. While it is the most expensive option, it is also the most scalable – perfect if you are planning on expanding.

Xero
Xero is a good option for smaller businesses who need to manage inventory. It is like a cheaper and less feature-heavy version of QuickBooks. Many users prefer it for its user-friendliness, particularly in sales tax reporting and automated billing. Do keep in mind that payroll processing is an add-on outsourced to a third-party vendor.

Wave
By far the most basic, Wave is the ‘bootstraps’ option of the three. It’s ideal for very small businesses, sole proprietors, and freelancers. Unlike the others, it does not operate on a monthly pricing model but instead charges a percentage fee on invoices and credit card payments. Great if you are just starting out, but you’ll probably outgrow it. It also does not have an inventory management feature, so it suits service-based businesses.

Start Right. Start Digital

Keen to get started on an online accounting solution? Consider OCBC’s Start Digital bundles that provide your business with up to 12 months free subscription for selected apps.

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