TWO out of three small and medium enterprises (SMEs) have indicated that they have less than six months of cash reserves, according to a recent survey by their association. 

The Small and Medium Enterprises Association of Malaysia (Samenta), which has more than 4,700 members across the country, said the enterprises reported of ultra-slim profit margins despite some 44% of them reporting revenue growth. 

Samenta president William Ng added that many SMEs were badly impacted by additional costs of doing business and were considering increasing prices.  

“This disconnect between sales growth and tightening cash reserves is indicative of severe margin compression among our SMEs, driven by rising costs of raw materials, energy, and salary.  

“The cascading effect of the removal of diesel subsidy, the increment in sales and services tax (SST) and wage inflation following the continued labour crunch are hurting the already thin margin of most SMEs.  

“Some of the SMEs surveyed are reporting profit margins as low as 2%, and many are losing money despite higher sales figures,” Ng said in a statement today. 

He said the association feared that the government would be lulled into believing that the SMEs were doing well because of the strong economic rebound and moderation of inflation.  

Ng added that the survey in July showed many SMEs reporting poor prospects for the rest of 2024.  

He said the margin compression challenge was further exacerbated by the increased compliance costs of e-invoicing and ESG standards adherence and reporting.  

He also said government agencies and local authorities had increased their fees to SMEs by between 15 to 250%.   

“Many SMEs are desperate for help, but do not know where or how to find that help,” he said, adding that the government must refrain from introducing any additional cost to SMEs. 

“We certainly must not wait until there is a mass closure of businesses and job losses to realise that the rosy headline numbers are not reflecting the reality on the ground for our SMEs,” he said.  

Established in 1986, Samenta is Malaysia’s oldest and largest association of SMEs. – September 6, 2024.