In the face of volatile geopolitical conditions, persistent inflation and global supply chain disruptions, the financial resilience of Singapore’s small- and medium-sized enterprises (SMEs) has never been more critical.
Cash flow remains the lifeblood of these businesses, yet a significant proportion of SMEs are failing to maximise the potential of their idle funds. By parking cash in low-yield bank accounts, they are leaving an estimated $800 million in potential interest earnings on the table each year.
The missed opportunity
A recent Syfe survey of 350 SME decision-makers in Singapore reveals a telling paradox: nearly half of SMEs prioritise guaranteed returns (48%) and liquidity (45%) when managing their cash, yet the solutions they rely on — primarily traditional bank accounts — deliver neither optimal yield nor sufficient flexibility.
The same survey reveals that the average Singaporean SME maintains fewer than 11 months of cash reserves, thereby exposing them to heightened vulnerability during economic shocks or periods of poor performance.
With rising operational costs, inflationary pressures and frequent payment delays, the margin for error is slim.
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The risk is not theoretical. According to the 2022 Asean Transformation SME Study by UOB, Accenture and Dun & Bradstreet (D&B), 82% of business failures are linked to poor cash flow management.
In such an environment, every dollar left idle is a missed opportunity to build resilience and fuel growth.
The evolving treasury landscape
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The current economic climate is challenging traditional approaches to treasury management.
Interest rates are trending lower, with some major local banks reducing savings account rates, and alternative banks offering rates as low as 1% per annum. While this reduces borrowing costs, it also erodes returns on surplus cash.
Simultaneously, global trade tariffs remain volatile, adding unpredictability to supply chains and cross-border transactions. SMEs operating internationally face additional risks from fluctuating exchange rates and shifting regional economic policies, making agile cash management not just a best practice, but a necessity.
Forward-thinking SMEs are now segmenting their cash into working capital (for daily operations) and idle cash (reserves or surplus). This approach enables businesses to keep working capital in flexible, liquid solutions for operational agility as well as allocate idle cash into higher-yielding, fixed-term or managed investment options to maximise returns without sacrificing access when needed.
Digital treasury tools
Historically, advanced treasury solutions were reserved for large corporations. The rise of digital platforms is changing this, democratising treasury management for SMEs. Today, businesses of all sizes can harness powerful tools once reserved for industry giants.
Modern digital treasury platforms now offer real-time dashboards, providing business owners and finance teams with instant visibility over their cash positions, exposures and upcoming obligations. This transparency enables faster, more informed decision-making and helps prevent costly surprises.
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Automated liquidity management tools further empower SMEs by optimising cash allocation. These systems can forecast cash needs, automate transfers and help businesses avoid overdrafts, ensuring funds are always in the right place at the right time.
Importantly, digital platforms also provide access to short-term investment products, such as money market funds and short-duration bonds, allowing SMEs to earn higher yields on surplus cash without compromising liquidity.
Additionally, integrated supply chain financing and foreign exchange (FX) hedging tools are now within reach. These features help SMEs manage payment cycles more efficiently and protect against currency volatility, which is especially valuable for businesses engaged in cross-border trade.
Practical steps for SMEs
In today’s unpredictable climate, future-proofing treasury operations is essential. SMEs can strengthen financial resilience by following these steps:
- Map out current cash management workflows: Identify pain points in visibility, planning or decision-making. Understanding where bottlenecks or blind spots exist is the foundation for improvement.
- Assess the impact of macroeconomic shifts: Consider how interest rate cuts, tariff changes and currency fluctuations affect your bottom line. This analysis helps SMEs anticipate risks and adapt strategies proactively.
- Segment cash into operational and strategic pools: Allocate working capital for daily use and invest surplus funds for yield and resilience, striking a balance between liquidity and return.
- Evaluate digital treasury platforms: Seek solutions that deliver competitive returns and liquidity, and that integrate seamlessly with your existing financial tools and processes.
- Commit to regular treasury reviews: Ensure strategies remain aligned with evolving market conditions and business objectives. Making treasury management a dynamic, ongoing process enables SMEs to stay agile and ready to seize new opportunities – or weather unexpected storms.
A strategic lever
Singapore’s SMEs stand at a pivotal moment. The old ways of managing cash — leaving funds idle in low-yield accounts — are no longer sufficient in a world defined by uncertainty and rapid change.
By embracing modern, tech-enabled treasury solutions and adopting a more strategic approach to cash segmentation and investment, SMEs can unlock significant value, strengthen their financial resilience and position themselves for sustainable growth.
Ultimately, effective treasury management is not just about safeguarding against risk; it’s about empowering businesses to seize new opportunities, drive innovation and thrive — no matter what the economic climate brings.
Jack Prickett is Syfe's chief commercial officer and head of Syfe for Business
