PETALING JAYA: In its latest RAM Business Confidence Index (RAM BCI) survey for fourth-quarter 2020, RAM Ratings highlighted that cashflow remains a key concern for businesses, particularly SMEs and micro enterprises, with nearly 70% of the survey respondents indicating that the conditional MCO (CMCO) has further eroded their cashflow, by an average of 30%-35% to date.
The overall index was little changed at 35.9 (third-quarter 2020: 33.7), still substantially below the threshold of 50 for sentiment to turn optimistic, suggesting that businesses may be feeling the pressure from the third wave of Covid-19 and the reinstatement of the CMCO in the Klang Valley since mid-October 2020.
The rating agency said without any brighter business prospects for now, the recovery paths of SMEs and micro enterprises appear challenging.
“To help these small businesses, additional support is needed to address their most immediate challenges. As such, it is unsurprising that the SME respondents want initiatives that will help alleviate pressure on their cashflow, which had been hoped for under Budget 2021.”
It pointed out that almost 80% of the surveyed firms indicated tax reductions as the most helpful measure they need but were not sufficiently addressed by the government. However, Budget 2021 provides for various schemes and incentives to promote digitalisation and autoation, which SMEs perceive as being less critical for now.
“This highlights the importance of financial measures that can help small businesses overcome their immediate challenges of sustaining cashflow. As such, less than 10% of the surveyed pool believe that Budget 2021 will be able to improve their chances of survival within the next year,” it added.
The survey findings also showed in order to manage their cashflow in an extremely tough year, SMEs have taken multiple steps to stay solvent, in which the most common action wasreducing staff count and/or cutting salaries.
As SMEs in Malaysia employ about 66%of the overall workforce, this does not bode well for the labour market or productivity, RAM said.
It said policymakers should engage with SMEs and micro enterprises to explore targeted financial support, which will allow these firms to stabilise their cashflow in the immediate to medium term.
“Once this hurdle has been overcome, they will be better poised to plan and execute changes to future-proof their businesses through digitalisation,” it concluded.
Source: https://www.thesundaily.my/business/cashflow-remains-a-key-concern-for-smes-and-micro-firms-ram-survey-shows-IC5510479