Small and medium-sized enterprises (SMEs) that went through digitalisation in 2020 had stronger revenue growth and a far better outlook for 2021, consistent with a study by UOB. The UOB SME Outlook 2021 Study found that two in five SMEs that implemented digitalisation initiatives in 2020 had stronger revenue growth than non-adopters, with companies that digitalised their entire business or multiple areas outperforming those that digitalised just one area. Among non-adopters, six out of 10 saw their 2020 net revenue decline from 2019.
The businesses that digitalised also are more optimistic about 2021. Three in five expect revenue to grow this year and seven out of 10 feel more prepared for post-Covid-19 business recovery. In contrast, only three in 10 SMEs that didn’t adopt digital tools expect revenue growth in 2021 and 4 in 10 non-adopters feel more prepared for business recovery after the pandemic.
According to the study, digitalisation efforts helped SMEs achieve greater productivity in 2020. This is in-line with the business objective that firms had listed as a top priority for the year during a special UOB study conducted in late-2019. SMEs in business services, manufacturing and engineering as well as community and private services saw the best year-on-year percentage increases in productivity and efficiency, starting from 44 to 49%. SMEs also benefited from digitalisation by helping to enhance customer experience, increase coordination across departments, enable remote working and drive business performance, all crucial within the midst of Covid-19 lockdowns and border closures.
Despite the progress made in 2020, smaller businesses still lag larger peers in digital transformation, with smaller firms making up 72% of SMEs that haven’t yet digitalised. Their top reasons for holding back include the prices, fear of cybersecurity issues and a scarcity of necessary skill sets among employees. In terms of costs, 26% of the SMEs said they need sufficient funds to continue with digital adoption, while 28% find it hard to justify the worth of the investment. Incompatibility issues between old and new systems were an obstacle for 1 / 4 of SMEs that haven’t digitalised.
In 2020, electronic payments and electronic invoicing were among the highest five digitalisation priorities for SMEs, in line with a requirement for cashless payments since the onset of Covid-19. Other priorities were payroll, accounting and sales.
Now, SMEs are getting to prioritise marketing and inventory management within the near future, alongside payroll, accounting and sales. This aligns with promising trends of doubled e-commerce spending in 2020 compared to 2019, and one in two Singapore consumers indicating a preference for shopping local to assist Singapore businesses to get over Covid-19. SMEs within the commodity, professional services and real estate/hospitality sectors are prioritising digital marketing, while those within the commodity, construction and infrastructure sectors decide to build up digitalisation for inventory management.
Seven hundred and eighty-two local SMEs that have revenue of less than S$100 million were involved in the UOB SME Outlook 2021 Study which was conducted from November 2020 to December 2020.