Malaysia’s SMEs are facing severe cash flow problems. Will Budget 2022 help?

RIABU focuses on helping small businesses get paid on time, and that is because such businesses are critical to a healthy global economy. That is certainly true in Malaysia, where such businesses make up more than 98% of all businesses and micro enterprises alone number over 650,000.

Following the outbreak of Covid-19 in 2020, Malaysia’s MSMEs were severely affected by pandemic-induced disruptions. Despite some government support, about 11,000 SMEs and 26,000 micro enterprises were forced to shut down as they could not cover operating costs during the pandemic.

With the sector in such dire straits, it was not surprising that the SME Association of Malaysia called for more help for these businesses ahead of Malaysia’s Budget 2022 last month.

The association’s president Datuk Michael Kang Hua Keong urged the government to provide tax-free incentives for entrepreneurs, reduce SME tax from 17% to 10%, and reduce the corporate tax rate for the first RM$1 million of taxable income. He further stressed that Malaysian SMEs were facing severe cash flow problems and were awaiting government aid.

The Malaysian Employers Federation (MEF) president Datuk Dr Syed Hussain Syed Husman also called on the government to provide additional wage subsidies and zero-interest loan moratoriums, to enable employers to continue with operations and retain employees.

On its part, the government has stressed its commitment to helping the economy recover from the impact of the pandemic. Budget 2022 includes the allocation of RM14.2 billion to the central bank’s SME special funds, and RM2 billion for the Targeted Relief & Recovery Facility. There will also be a special tax exemption for MSMEs until June 2022.

Wage subsidies, funding support  for innovation hubs and job creation schemes will also help such businesses, while under the Industry4WRD initiative, RM45 million will go to SMEs and companies in manufacturing and servicing.

MSMEs are no doubt happy for any help they can get during this challenging time. However, as government support inevitably tapers off, they also face other challenges such as inflationary pressures and possible interest rate movements. In this context, it is crucial that these businesses don’t just rely on government aid, but also prioritise getting their cash flow management processes in order.

Indeed, small businesses often neglect the importance of setting themselves up to become the first in line to get paid by their solvent customers. This has to be done through managing customer relationships in a systematic way and is actually a very important capability they can deploy when the economy starts to swing back. 

RIABU also believes that large companies that work with such businesses have an ethical responsibility to pay these suppliers on time so as to help ensure their survival — check out our Pledge2Pay initiative here. To survive the ongoing disruptions will require governments, large companies and SMEs themselves to all do their part.

Get more tips on effective cash flow management from our book, Let The Cash Flow. To find out more about how RIABU helps small businesses get paid on time, visit Riabu.com