The Manila Times

SME FIRST CIRCLE

NICHOLAS MARALIT

ALOT of negativity around the world economy has been evident lately. Big banks getting foreclosed, tech companies with mass layoffs and rising inflation has been all over business news feeds and social media feeds. This ponders the question if we are indeed heading into a recession. Now, what does this mean for Philippine SMEs (small and medium enterprises) for the near future? I would like to share some tips that I believe will help SMEs during these uncertain and trying times.

Focus on how to access cash

In times of a recession, the most important resource a business should have is liquidity. Businesses should be ready to pivot and have cash reserves on-hand. The way to do this is to monitor cash flow and expenses extensively. Luz Urrutia of Forbes states, “Tasks such as revenue projections and expense tracking should happen on a weekly basis so that business owners know their financial position and can adjust their activities accordingly.”

Reduce expenses

By knowing your cash flow situation, it would be easier to cut costs and adjust prices. During a recession, it would be best to pivot plans on growth such as hiring new employees, expanding to new locations or buying more inventory. SME owners could also raise their prices to meet short-term cash needs. Although, they could be hesitant “due to anticipated customer backlash, small-business owners, in particular, are finding success with radical transparency around pricing. As always, communication is key, and investing in customer relationships can maintain brand loyalty. (Urrutia, 2023).”

Secure financing

“If small businesses want to succeed in the long term, they need to survive in the short term. For many, that requires applying for loans or grants to cover immediate expenses such as payroll, rent and input costs (Urrutia, 2023).” However, SMEs should only apply for loans if they really need it. Applying for loans during a time of economic downturn has more risks since the business might not be able to pay the loans on time.

That is why SMEs should focus on their financial performance and health because it would be easier for them to be accepted for loans. Also, they will have a higher chance of paying these loans on time.

Moreover, the BSP (Bangko Sentral ng Pilipinas) has also been raising interest rates to combat inflation. This would mean borrowers would have to pay higher amounts on their loans.

Conclusion

I always believe in the light at the end of the tunnel. These trying economic times will eventually end and we will have positive GDP (gross domestic product) and economic growth sooner rather than later. I hope that these tips help SMEs, but also everyday Filipinos on how to budget their money, and to learn how to prepare “for a rainy day.”

Nicholas David Star “Nico” Tobias Maralit is a ###i_i###usiness support analyst at First Circle Inc. In his free time, he loves to read, watch documentaries and research about the current trends in business and technology. He is passionate about financial technology, financial literacy and investing. To learn more about Nico, you may visit his LinkedIn profile here: https://www.linkedin.com/in/ nicholas-maralit

Business Times

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2023-04-01T07:00:00.0000000Z

2023-04-01T07:00:00.0000000Z

https://manilatimes.pressreader.com/article/281857237800124

The Manila Times