Saturday, May 26, 2018

Financing cost for small business

Many small businesses face the problem of slow payment by their principals. It added to their cash flow problem and increased their cost of financing.

Their principals include the government agencies and the government linked companies.

The slow payment is due to the bureaucratic process adopted by government agencies and the wish to save interest by paying at a later date.

This is a counter productive practice. The small business has to incur additional expenses in chasing for payment.

The financing and administrative cost of the small business increases their cost of doing business. They have to add this cost back to the cost of their services given to the principals.

This practice allows the banks to make a bigger profit. It is bad for the economy.

The government and government linked companies can adopt a practice of paying their suppliers and contractors promptly. This will reduce cost of financing and help to reduce the cost of doing business, to the benefit of all parties.

If the public sector takes the lead in this practice, the private sector will follow.

We can improve the efficiency of our small businesses.

Tan Kin Lian

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