Western Union Business Solutions, a division of the Western Union Company, a leader in global payment services, has conducted a study into the attitudes of Singaporean SMEs, which revealed significant anxieties over the state of the global economy in contrast to those of Hong Kong, the Philippines and Malaysia.

The survey revealed almost 40% of SMEs in Singapore are worried about the global economy, far more than any other country surveyed and double that of Malaysia (16%) and the Philippines (19%).

Access to credit also rates as a major issue for Singaporean SMEs with over 60% noting it as a challenge facing their business. While this figure is on par with other surveyed Asian nations, it far outweighs the 25% of SMEs in the UK that (in a separate report) conveyed similar concerns.

As a corollary, SMEs in Singapore are less likely than those in Hong Kong, Malaysia or the Philippines to borrow in order to cover the costs of higher than anticipated foreign payables (5%). The report suggests they are more likely to dip into working capital (52%) or decrease profit margins (37%) to manage any shortfall.

Interestingly, the Philippines was revealed as the country most likely to use working capital (65%) but the least likely to decrease profit margins (21%) followed by Hong Kong (59% and 28% respectively).

From a foreign exchange perspective, this conservative approach correlates with the fact that more than 25% of Singaporean SMEs fix the costs of international invoices when they receive them. This figure is over 10% higher than in any other country surveyed, and over double that of Malaysia and the Philippines.

Nevertheless, the report shows that more than a quarter of SMEs in Singapore (28%) leave themselves exposed to unexpected costs by not knowing the true cost of foreign invoices until (or after) paying the invoice. This figure, while high, compares favourably with the numbers relating to the Philippines (52%), Malaysia (49%) and Hong Kong (38%).

Possibly to counter the impact of fluctuating currency markets, over 32% of small and medium sized businesses in Singapore admit to monitoring FX rates regularly. This is proactive but inefficient for SMEs that could adopt a technology solution to do this for them.

Peter Scully, Regional Divisional Director, Asia-Pacific, Western Union Business Solutions, said these findings suggest a deepening economic anxiety, which, once entrenched, can cost business owners time and money.

“It is all too common for business owners to get stuck in the habit of checking FX rates constantly when the time could be better spent on winning clients or developing employees. Furthermore, the majority of SMEs do not set the costs of their global invoices upon receipt, leaving them at the whim of markets and exposing their margins to unnecessary risk.”

“These problems can often be solved by improving visibility into cash flows. Creating certainty despite a volatile market can be achieved by engaging in sound hedging strategies, which can provide both flexibility and peace of mind,” said Peter Scully.

With regards to international trade, the report revealed that 90% of Singaporean SMEs currently purchase from China; only 27% of those, however, choose to make those payments in RMB.

These figures suggest that most Singaporean SMEs are bypassing the potential benefits of using local currency when dealing with their Chinese trading partners.

“Transacting in local currencies present many potential benefits. One of the strongest is that companies can look to negotiate possible discounts as paying in RMB can reduce foreign exchange risk on behalf of their Chinese suppliers. Our research showed that fees of, on average, 3% are often added to invoices by Chinese suppliers to protect against market fluctuations,” Peter Scully concluded.