Managing cashflow is a perpetual challenge for SMB owners, and the ongoing economic uncertainties have only intensified the struggle. A recent report from Xero revealed that 31 percent of Singapore SMB owners were unable to pay themselves, while 19 percent have had to use some of their personal savings to keep their business afloat.

What can SMBs do to improve their cashflow, in addition to cutting out non-essential expenses and raising prices? Here are some new methods that you may not have thought about. 

1. Pivot to subscription-based models

Subscription-based businesses have become increasingly popular and prevalent, ranging from streaming services to clothing. Shifting from traditional one-time payments to recurring revenue through a subscription-based model is a strategic move that can bring consistency and predictability to your cashflow. This strategy ensures a regular influx of funds, aiding in better financial planning and stability.  

There are different types of subscription business models, including access membership, open membership and freemiums. Access membership is where users pay a fee to access exclusive services of a product or experience. Amazon Prime is an example, where subscribers pay to access a range of benefits such as free shipping and streaming services. In open membership, users can pay to receive a range of content or services or engage in additional activities. LinkedIn Premium is an example of open membership, where users can access the platform for free but additional features like InMail credits, enhanced analytics, and job search tools require subscription. 

With the freemium model, members can access a limited version of content or services for free, but must pay to access the full version. An example of a freemium model is when a mobile game allows players to play a limited version of the game for free, but payment is required to unlock additional levels or features.

To make it easier to shift to subscription-based models, SMBs can take advantage of platforms like Shopify, Chargebee or Paddle, which provide recurring payment functionality and user-friendly interfaces for customers.

2. Lease unused assets

Monetising underutilised assets is a creative strategy to generate additional revenue and alleviate cashflow challenges. SMBs can explore leasing options for unused office space, equipment, or even intellectual property.

Leasing unused assets not only generates income but also optimises resource utilisation. It's a flexible solution that adapts to changing business needs. With the rise of remote work, leasing out vacant office space, for instance, can be a viable option to unlock value from physical assets. There are resources such as Savills Singapore and CBRE, which offer advice to businesses on office space solutions.

3. Explore dynamic discounting programs

Implementing dynamic discounting programs is an effective way to incentivise early payments from clients. Dynamic discounting is a financing model that involves offering discounts to clients who settle their invoices ahead of schedule. This model can help SMBs improve their cashflow by providing them with access to working capital at a lower cost than traditional financing options.

Firms like CRX Markets and KredX specialise in cash management solutions for businesses and offer resources for dynamic discounting programs. Dynamic discounting benefits both parties involved – your business and your client. You receive prompt payments, improving your cashflow, while your client enjoys cost savings.

4. Explore invoice financing options

Another option that SMBs can consider is invoice financing. Invoice financing allows SMBs to access working capital without waiting for lengthy payment cycles. This is a solution that allows unpaid invoices to be sold to a third-party financing company at a discount in exchange for immediate cash. What this means is that you get immediate funds against outstanding invoices, and you can deal with cashflow gaps without having to wait for customers to pay.

Some banks offer invoice financing as part of their solutions. DBS offers Purchase Invoice Financing which supports SMBs for procurement of goods by paying the supplier invoices first. OCBC also offers an invoice financing solution for SMBs to convert their invoices into cash with 0.6 percent monthly interest.

5. Seek additional funding

Looking for new funding does not necessarily have to be for expansion. Adding new funds can also help keep your cashflow sound. SMBs can try various avenues for this including government grants and alternative funding sources like crowdfunding.

There are numerous grants and schemes that cater to SMBs in Singapore. The funding from grants like these can be utilised to offset costs such as that for adopting digital capabilities, expanding to a new market or hiring and training new staff, all of which can in turn contribute to more revenue. In addition to government funding, SMBs can also go their own way by using crowdfunding platforms like Kickstarter and Indiegogo to raise funds from the public.