LETTER | SME dilemma: Not getting paid by their big clients

LETTER | Covid-19 pandemic has changed the world but is the world ready to change. No person, rich or poor and no business, large or small, have not been affected by its invisible and creeping presence.

As governments all over the world scrambled to contain the impact of the pandemic for the medium and long terms but its short term impact has been significant and extremely disruptive. Livelihood lost, businesses shuttered, travel stopped and education stunted everywhere.

It is gratifying to see the world over, with some exception, that all these impacts being received graciously albeit not without complaints by the people and businesses.

Besides the ordinary people, amongst the hardest hit in Malaysia is the medium-sized, small and micro-businesses. These SMEs are businesses that contribute about 33 percent of our country’s GDP, 66 percent of total employment, and around 17 percent of total exports. The bulk of the SMEs — around 89 percent — are involved in the services sector.

The failure of SMEs is not an option for Malaysia. They must endure.

As such, many governments including our own in Malaysia have put in play various out-of-the-box proactive economic measures to safeguard jobs, subsidise wages, support the self-employed and protect industries. These have been widely reported. I am confident such concerned or prihatin measures would be helpful to many who needs them.

"Kita Jaga Kita" is the slogan touted nationwide to ensure no one is left behind. There is an overwhelming "oneness" to fight this war against Covid-19 under the leadership of our prime minister who is ably aided by “national heroes” in the frontline like the doctors, nurses, the police, the military and many others.

I am delighted to see everyone come together to do good for the country. We see the Malaysia Boleh spirit come to the fore to make things happen. There has been deep and unabashed enthusiasm amongst many to help SMEs deal with Covid-19.

A simple example is the effort by the community in Mutiara Damansara. They established an online market for SMEs called Souq Mutiara Damansara to sell their goods with very cheap home delivery.

As much as we appreciate and celebrate such efforts, we must also be cautious and wary of those in our midst who are totally insensitive to the plights of the SMEs or worse, takes advantage of them.

It is good that the SMEs have got the Special Relief Fund, the moratorium on loans, salary subsidy for employees, etc but it will not help them much if their clients comprising of mid-sized and large organisations, both in the private or public sectors, stop paying them their dues or do not pay them on time despite goods sold or services rendered.

I don’t believe there would be any business owners, board or management who would allow their companies to purposely take advantage of their SME vendors. Having said this, I personally know of an SME involved in consultancy services that has not been paid since January 2020 despite the movement control order (MCO) only starting in mid-March. If not done on purpose, then is it an oversight or negligence?

If it happened to this SME then there may be others that have experienced the same. Many SMEs in the services industry tend to be "at the mercy" of their clients. Many are in a “live from hand to mouth” (kais pagi, makan pagi; kais petang, makan petang) kind of business as consultancy jobs are few and far in between.

With this picture in mind, imagine the trouble they got into when the SME that I mentioned was "forced" by their client to "agree" to reduce their fees up to as much as 35 percent from March onwards after not being paid from January. It is hard to believe this is an isolated case.

When times are good, consultants are often expected to deliver more than what was contracted. If they don’t do then they just get dumped. Similarly, when challenges arise, the risks and losses seem to be forced down their throats first.

Most big organisations do have the funds to cushion the Covid-19 impact.

Many still have healthy cash flow and credit lines from banks available at any time. Unfortunately, some had used the MCO as an excuse to "slash" contractual sums and hold back payments to their SME vendors. All in the guise of "being prudent".

I guess it should be alright and understandable if they don’t have the financial means, but if they are financially sustainable, it is just downright irresponsible and very unMalaysian.

When the MCO began, the particular SME I mentioned had no choice but to accept this unfortunate "fate" and had to "beg" and pray that payment would be processed. Being little with insignificant negotiating power the only thing they could do is complain to their ex-banker like me.

We must remember that SMEs need their payment to be able to make good their own legal and financial obligations. The SMEs still have to come up with their own income for this as any assistance derived from government measures are not enough and are merely there to complement their income, not replace.

Clients of SMEs must have the common resolve to come out stronger from this pandemic together as a nation. It should not be a dog eat dog situation or everyone for themselves.

With this in mind, perhaps it would be a good idea for the responsible mid-sized and large corporate owners and managers, be they from the private sectors or public sectors, to reaffirm their commitment to do good by all their business partners especially their SME vendors throughout the Covid-19 pandemic by paying them their dues and pay them on time.

The government may also want to set the tone from the top and set a good example for the corporate by also reminding their agencies, which would have a lot of SMEs servicing them as vendors, to do the same. This is to ensure that whatever economic measures that have been arranged and implemented by the government for the SMEs are not frustrated or rendered meaningless.

Let’s do unto others as we would have them do unto us. Remove this dilemma for the SMEs. 

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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