By Azlan Ahmad, Head of SSB (Startup & Small Business), Sage Asia,
In Malaysia, the 2021 budget was announced in the midst of a global contagion and political uncertainty. Finance Minister, Tengku Zafrul states that the Government has made protecting the Rakyat’s lives its utmost priority. As small business champions, at Sage, we are primarily focused on helping both SME businesses, as part and parcel of the economic recovery, as this affects millions of Malaysian livelihoods.
In bringing stability back to SMEs, it is equally important that we ensure businesses have the support they need to digitalize.The allocation of RM9.4 billion announced in Budget 2021 will develop the national digital strategy across industry sectors. It is capable of closing the digital gap and helping businesses better equip themselves towards recovery and resilience.
Here are the Budget 2021 measures we believe will make a difference in helping businesses recover:
Microcredit Schemes for Ailing Businesses
During this period, many companies are starved for cash and available credit terms can mean extending their lifespans. RM1.2 billion is set out for microcredit schemes that would greatly aid more fragile businesses, whose financial resources or credit history would preclude their eligibility for traditional business loans.
Seeing as most of them can only survive two months at most without revenue, this would lighten their cash flow burdens. In my frequent interactions on the ground with micro business owners, their greatest fear is not having enough funds at hand as this means they are not able to sustain their business, employees and families.
This means SMEs can have improved cash flows, however they must still pay close attention to their financial data in order to make better decisions, with the use of cash flow modelling.
A business’ cash flow model is a picture of its assets, investments, debts, income and expenditure, projected forward using data points such as overheads, income, inflation, wage rises and interest rates. These many figures are fast changing given unexpected world events, and cash flow modelling tools allow businesses to have big-picture visibility before it’s too late. They are like the instrument indicators on a vehicle. Businesses must pay attention to them.
Digital Payments & e-Commerce for Healthy Cash Flow
By pivoting towards the adoption of digital payments, businesses can increase and speed up cash inflows, via e-payments instead of traditional invoices. The Targeted Assistance and Rehabilitation facility worth RM2 billion under BNM is to be introduced through loans from banking institutions ー a welcome boost that makes funds available to cash-strapped SMEs.
Sage’s UBS solution enables e-payments with its “Direct Pay” feature, where invoices can paid seamlessly through financial providers. This also allows our customers to receive instant payments via e-wallets such as Boost, GrabPay and Touch ‘n Go. With this facility, SMEs are paid much quicker, increasing their stream of working funds. Business owners can then focus on other key areas such as business operations and revenue generation, without being demotivated by poor cash flow.
Government stimulus to optimize e-commerce and e-wallets with frictionless spending platforms is at its most critical juncture. Their allocation of RM150 million in training programmes and digital equipment to 100,000 entrepreneurs will quicken adoption under the e-Commerce SME and Micro SME Campaign. E-commerce would enable SMEs to look for business beyond their local borders and expand into international business.
As reported by a research carried out by Ernst & Young in the midst of the pandemic, 53% of SMEs have been disrupted by poor internet connectivity. The Malaysian Communications and Multimedia Commission (MCMC) allocation of RM 7.4 billion to build and upgrade broadband services will contribute to a spur in virtual services whilst meeting the needs of a world digitalising faster each day.
It is also encouraging to see the government partnering with the private sector to achieve increased internet connectivity. RM1.5 billion goes to implementing the Jaringan PRIHATIN Programme which distributes mobile credit. The RM1.5 billion figure is matched by telecommunication companies with benefits such as free data. This means that the estimated 8 million eligible individuals in the B40 category will now have access to e-commerce, spurring the growth of digital transactions and local consumption.
These concerted efforts, when implemented effectively, will continue to support SMEs along their recovery path while fastening the pace of their technological adoption and digitalisation.
Change is Necessary
The government is setting its sights on transforming our economy into one of higher income, sustained through long-term productivity and the use of new technologies such as automation and digitalisation.
Yet, navigating such fiscal measures whilst grappling with the persisting pandemic will be a path never travelled. The government certainly has their hands full, with the recovery of small businesses as a rightful goal they have set for themselves.
However change and rebirth is often a painful process, and weathering the contagion definitely entails revamps for businesses and rethinks for governments. Whatever the political scene, I am encouraged to see the “#kitajagakita” sentiment at play, as SMEs, especially the smaller ones, are not overlooked.