A card up their sleeve

A card up their sleeve
PHOTO: A card up their sleeve

SINGAPORE - Small and medium enterprises (SMEs) may usually be short on cash and resources, but they have a frequently untapped tool that can multiply the limited resources available to them: electronic card payment methods.

This is especially so as SMEs seek more bang for the buck in an increasingly challenging environment, and also venture overseas for a larger market, says MasterCard Singapore general manager Julienne Loh.

"We've seen some distinct changes within the SME sector in recent years," says Ms Loh.

"In Singapore, the profit margins are all being squeezed, and the costs of goods are getting higher and higher, particularly for labour."

At the same time, SMEs have become more aware of available business solutions and hold higher expectations of those that they are willing to accept, she says. "They are now hungrier for robust solutions that give them greater efficiencies."

SMEs want cards that not just enable them to pay for items on overseas business trips or to order goods from e-commerce suppliers, but also give them perks such as reward points or discounts with certain vendors, Ms Loh adds.

While more well-known for its personal card services, New-York listed MasterCard also provides the technology and network for corporate debit and credit cards, as well as electronic payment services between businesses.

The firm processed 27.3 billion transactions globally in 2011, an increase of 18.3 per cent from 2010. Revenue from Asia-Pacific, Middle East and Africa grew 30.1 per cent to US$805 billion (S$999 billion)in 2011.

Its commercial payments segment - comprising corporates and SMEs - made up about 10 per cent of global business volume by dollar amount, but has been growing at a faster rate than that of its consumer business, says Ms Loh.

Cost control

With SMEs "particularly circumspect" about how and what they invest their money in, tools that can streamline or track how much a company has been paying a particular merchant would be helpful for them, says Ms Loh.

Using MasterCard's Smart Data technology as an example, she says: "On a snapshot you can see 'I've been spending so much over so much time'. It's a tool that helps them to track, so they don't have to re-invent the wheel by buying their own software."

It could also help SMEs negotiate better with merchants which they are spending a substantial amount on, she adds.

Besides that, a commercial card can help SMEs track corporate travel and entertainment expense, which is the second largest controllable expense after payroll expenses such as salaries and benefits, according to MasterCard's research.

With such information at hand, SMEs can then forecast travel and entertainment budgets accurately, and allocate resources accordingly.

This helps the company to improve efficiency in preparation for expansion, says Ms Loh.

Cashflow management

For SMEs, maintaining a healthy cashflow system is vital.

"A small hiccup in cash flow can be detrimental to a SME's wellbeing, making it more susceptible to the effects of late payments and tightening credit lines," says Ms Loh.

With financial institutions having become more stringent in lending since the 2008 crisis and companies not wanting to be over-leveraged, a debit account is naturally one of the tools SMEs can use.

"(With a debit card) you use what you have. You don't overborrow."

Electronic payment tools also spare business owners from the hassle of paperwork and additional administrative expenses.

"SMEs are constantly searching for simple, safe and secure solutions that will enable them to save time and reduce paperwork in filing and consolidating paper receipts for expenses.

"Corporate card payments not only liberate business owners from the hassle associated with paperwork, but also provide them with a systematic and fuss-free way of tracking spend," she says.

Multiple roles

The additional convenience is particularly important given the constraints an SME faces.

"Unlike large enterprises that have the resources to hire specialists or departments to manage their processes and financial accounting in-house, smaller enterprises have to carry out these functions themselves, despite the fact that they do not have background nor training in the relevant fields," says Ms Loh. "Their lack of experience in specialised functions results in more time and effort spent to carry out these tasks."

Also, business owners in SMEs often wear multiple hats.

"They can start off as CEO, but they also have to play the role of the CFO, COO and CIO and so on...They have to do everything, all in one.

"Obviously we can't take over his role, but we hope to be able to lighten his load in terms of cashflow management and cost control so that he can focus on the business... Payment and transactions should be one of the last things to take up (his) time," she said.

Greater potential

All told, the awareness of corporate cards among SMEs is quite high here, though not commonly practised as many companies leave it as a non-mandatory option for their staff, Ms Loh says.

Most staff choose to use their personal cards for overseas travel and entertainment expenses because they are used to doing so.

There are, however, benefits for companies when staff use the corporate cards for overseas travel and entertainment expenses, she says.

"(If personal cards are used), when it comes to claims, there's a lot of reconciliation that's required. When using a corporate card, everything can be consolidated with a particular travel agency and then settled by the finance department," she explains.

Still, with SMEs increasingly moving online for business needs ranging from products and materials to online management tools, as well as going overseas in an effort to enlarge their market, the commercial payment market looks set to expand exponentially.

Says Ms Loh: "There is definitely a lot more room for growth.


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