KUALA LUMPUR: The Small and Medium Enterprises Association of Malaysia (Samenta) has urged the government to refrain from introducing any additional cost to the small and medium enterprises (SMEs) due to the margin compression faced by the group.
Samenta national president Datuk William Ng said SMEs continue to face severe margin compression even as the economy is on a recovery path.
"Samenta urges the government to refrain from introducing any additional cost to the SMEs and to rail in any incremental fees by the various agencies and local authorities.
"We certainly must not wait until there is a mass closure of businesses and job loss to realise that the rosy headline numbers are not reflecting the reality on the ground for our SMEs," he said in a statement.
In the latest survey conducted by the association, two out of three SMEs indicated they have less than six months of cash reserves.
"This is despite some 44 per cent of the SMEs reporting revenue growth. 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 subsidies, the increment in sales and service tax (SST), and wage inflation following the continued labour crunch are hurting the already thin margin of most SMEs."
Ng said some of the SMEs surveyed are reporting profit margins as low as 2.0 percent, and many are losing money despite higher sales figures.
"We are concerned that the government may be lulled into believing that our SMEs are doing well because of the strong economic rebound and moderation of inflation," he said.
Ng added many SMEs were badly impacted by the additional cost of doing business and are mulling steep increases in selling price.
He noted the challenges of margin compression are further exacerbated by increased compliance costs posed by the upcoming e-invoicing mandate and ESG standards adherence and reporting.
"Despite these, various government agencies and local authorities are increasing their fees to SMEs by between 15 to 250 percent. Many SMEs are desperate for help but do not know where or how to find help," he added.