How SMEs can build certainty into their businesses for 2023

Koren Wines, Managing Director, Asia for Xero

Many of the macroeconomic headwinds which created turbulent operating environments for businesses in 2022 are forecasted to persist, with rising inflation, volatile monetary policies, supply chain disruptions and political conflict continuing to impact growth, certainty and stability.

In its recent Regional Economic Outlook Report for Asia and Pacific, the International Monetary Fund has predicted that in 2023, Asia  will experience the slowest growth it has seen in two decades.

This ongoing volatility and uncertainty will have a significant impact on Asia’s business ecosystem. Nowhere will this be felt more than amongst small and medium enterprises (SMEs), which account for 99%  of businesses in the region.

60% of SMEs polled by the Singapore Business Federation (SBF) claim to have been negatively impacted by the ongoing Ukraine war with rising business costs and supply chain disruptions. Concerns over an impending economic downturn present even more long term challenges

Here are three recommendations that SMEs should take into consideration for the year ahead to help develop greater efficiency, productivity, and resilience:

Upskill and reskill to bridge the talent gap and curb workforce shortages

Workforce shortages will continue to be a challenge for SMEs, with data from Singapore’s Manpower Group indicating that three in four Singaporean employers face difficulty in finding suitable talent.

According to a survey by the Institute of Singapore Chartered Accountants, one in three employers listed labour and talent shortages as their top two concerns. Faced with this talent crunch, it is crucial for SMEs to make the most of their existing teams through upskilling and reskilling.

Investing in the training and development of staff (especially when it comes to digital tools) has proven to be highly valuable, particularly when working with a lean team. A recent study shows that most Singaporean businesses see digitalisation as a way to overcome manpower constraints. Implementing digital tools not only helps streamline workflows and increase productivity; it also keeps employees engaged. According to recruitment agency Robert Walters, investing in development and providing the opportunity to learn new skills  is key for employee retention.

SMEs should leverage data more to make informed business decisions

Over the last few years, business owners have largely focused on survival and staying afloat through the pandemic. In 2023, attention will shift to increasing profits and boosting overall business performance. Incorporating data insights and analytics into their business planning will be crucial to enabling SMEs to grow and succeed.

In today’s business world, speed and agility are vital. In times of uncertainty and also in highly competitive environments, the ability to pivot quickly can mean the difference between survival or going under. Data-driven insights can help SMEs build resilience and adapt their products or services to shifts in market preferences and requirements.

Investing in sustainability could provide huge opportunity

A BBC report has revealed that consumers in Asia Pacific (APAC) are increasingly committed to sustainability. The research showed that 68% are willing to pay more for brands with an ethos of sustainability and eco-friendly practices. In addition, 60% of SMEs in Singapore believe in the importance of incorporating sustainable practices into their businesses. This is a clear indication that organisations of all sizes need to consider their ecological impacts and dedicate resources to renewable practices if they’re to keep pace with consumer expectations.

The good news is that SMEs in Singapore have strong support from the government to implement these practices. Initiatives such as the Enterprise Sustainability Programme (ESP) are aimed at helping SMEs to embrace sustainability by offering courses and playbooks on decarbonisation.

There is also a huge opportunity for businesses focusing on sustainability within their products and services. With a strong appetite for sustainable products amongst increasingly mindful consumers.

The most important takeaway is digital tools offer SMEs a significant advantage to mitigate the impacts of impending macroeconomic challenges. Implementing and adopting the right digital solutions not only offers business owners the financial acumen to make decisions fast, but also help them plan for the future.

SMEs can stay one step ahead even in the face of looming economic risks, make informed decisions for long-term growth and ultimately build greater certainty into their businesses.