By Koren Wines
Comprising 97% of all enterprises and employing nearly half of Malaysia’s workforce, small and medium-sized enterprises (SMEs) are the backbone of the country’s economy.
However, without the substantial capital and resources larger companies enjoy, SMEs are particularly vulnerable to economic fluctuations. Inflation, rising costs, labour shortages, and supply chain disruptions can lead to significant cash flow issues. During the COVID-19 pandemic, small businesses’ ability to manage finances, pay bills, invest in growth, and remain solvent were severely hindered, resulting in the closure of over 176,000 SMEs. As recently as 2023, nearly a third of local SMEs reported having less than two months’ worth of cash reserves, even though 60% have seen revenue growth.
While it is almost impossible for small businesses to prepare for every contingency, smart cash flow management can be a huge help for businesses trying to stay on track.
Managing Cash Flow with Digital Tools
Cash flow is the lifeblood of small businesses. Being able to understand, manage, and forecast cash flow is essential for a business’ financial health. Digital tools can provide significant support to assist with planning, financial projections, expense tracking and speeding up payments.
For businesses looking to grow and expand, cloud solutions can provide critical support to help manage the increasing complexity of their operations. Whatever the job, there is an app available for it. From data extraction, document management, eCommerce storefront connectors, POS (point of sale), Payroll, reporting and consolidation, workflow management, order and inventory management, time tracking to CRM (customer relationship management), digital tools can automate finance and operational tasks and management to help businesses run more smoothly and efficiently. Additionally, the data that flows through these solutions can create invaluable business insights to help them better plan and invest for the future.
Cloud accounting software with e-invoicing features can also facilitate compliance with Malaysia’s incoming e-invoicing mandate. Like many other countries around the world, this shift towards electronic reporting will enable enhanced tax administration and operational efficiency for participating companies.
For SMEs, benefits like improved efficiency and accuracy, reduced costs, and faster payment processing are particularly valuable. Additionally, e-invoicing helps businesses manage accurate financial record-keeping for tax purposes.
Choosing the right software will not only help Malaysia’s SMEs better manage their cash flow but also ensure seamless compliance with government regulations.
Future-Proofing Starts with Better Financial Management
By adopting digital tools, SMEs take an important step towards taking control not only of their cash flow, but their financial health overall, which can help them stay resilient in the long-term.
Investing in digital solutions to automate core business and finance activities, improve overall efficiency, accuracy and productivity, and provide key data and insights will be a significant advantage for Malaysian SMEs as the country embarks on its digital transformation journey.
Koren Wines is Managing Director of Xero Asia
