Cross-border cash flow restructuring vital for SMEs

Local small and medium-sized enterprises (SMEs) need to overhaul their cash flow management and governance models to stay competitive in the international market. According to Lim Lian Kian, Executive Director and Head of China Desk, Corporate Banking and Investment at UOB Malaysia, the primary hurdle for SMEs expanding into China, Hong Kong, or ASEAN is optimizing cash flow without compromising company capabilities.

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If SMEs can shorten this cash cycle, they can double their business growth contribution.

Lim advised SMEs to re-examine their business models by shortening operational cash cycles through better payment term negotiations with customers. "If SMEs can shorten this cash cycle, they can double their business growth contribution," he stated. However, he acknowledged that cross-border fund transfers are often complex and challenging. "Therefore, companies can leverage solutions like regional cash pooling through digital platforms to facilitate fund movement, subject to local regulations," he explained during a forum at the Hong Kong-Malaysia Business Seminar.

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Therefore, companies can leverage solutions like regional cash pooling through digital platforms to facilitate fund movement, subject to local regulations.

He also noted that conventional banking, which often assesses companies based on historical performance or collateral, must adapt to market needs. SMEs facing funding constraints but operating within the supply chains of high-performing multinational corporations (MNCs) can utilize supply chain financing. This allows them to leverage the credit strength and balance sheets of major buyers to secure financing more easily. High-potential SMEs also have opportunities to connect directly with strategic investors for fundraising, reducing reliance on traditional bank loans.

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Strict regulatory compliance and organized documentation are effective strategies for increasing a company's valuation and building investor confidence.

Careen Wong, Vice President of the Hong Kong Law Society, emphasized that legal compliance should not be viewed solely as a burden. "Strict regulatory compliance and organized documentation are effective strategies for increasing a company's valuation and building investor confidence," she said. Companies aiming for international growth must respect local laws and maintain complete business records. Underestimating documentation can be detrimental later on. "Practices allowed in one country may not apply elsewhere, making understanding cross-border cultural and legal differences critical," Wong added. She highlighted Hong Kong's strategic advantage in assisting local and international companies, boasting nearly 1,800 lawyers.

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Practices allowed in one country may not apply elsewhere, making understanding cross-border cultural and legal differences critical.