Small firms, hit by 80% sales dip, cashless soon

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SMALL firms surveyed by the Asian Development Bank (ADB) and the Department of Finance (DOF) nationwide warned that they will run out of cash in the next few months after recording an 80-percent drop in sales during the lockdown period.

Based on the key findings from the enterprise survey conducted by ADB and DOF, with a decline in April sales, a third of the firms who responded to the survey said they will run out of cash in 1 to 3 months, while nearly 20 percent said they would run out of cash in 3 to 6 months.

With this, the primary request of the firms to the government is wage support for them to continue paying their employees; deferment of their tax payments; low-interest or subsidized loans; and reduction in taxes.

“Enterprises are facing serious working capital constraints,” the report stated. “Additional finance in the form of loans and overdraft facilities should be a high priority for government assistance.”

The survey also found that more than half or 53 percent of firms could not arrange to borrow even P50,000 within one week and 57 percent said it was more difficult to borrow that amount now than in 2019.

With the lack of resources, around 49.3 percent of enterprises did not pay wages to employees temporarily after March 15, as the lockdowns began, while 28.9 percent reduced the total amount of wage payments.

The data showed that only 19.9 percent of the firms reported no change in payment conditions to employees.

The survey results showed that only 2 percent of enterprises reported an increase in total wage payments to employees after the pandemic began. The ADB said this suggested special needs identified by specific industries.

The data also showed that nearly half or 41.4 percent cut their working hours and a third or 32 percent of firms surveyed said they reduced the salaries and benefits of their employees. Only 14.7 percent of the firms resorted to layoffs.

In April, the survey results showed 47.8 percent of small firms and 45.3 percent of large firms reducing working hours of regular employees.

The data also showed that 45.9 percent of small firms and 43.6 percent of large firms granted leaves, while 34.9 percent of small and 30.4 percent of large firms reduced salaries and benefits.

However, there were fewer small firms who laid off workers at 14.2 percent than larger firms at 17.7 percent.

Work from home

Meanwhile, the survey also asked respondents regarding work-from-home (WFH) arrangements. Data showed WFH arrangements were not feasible for most enterprises.

Data showed that 57 percent of enterprises reported that it was not possible to adopt WFH for any workers. Less than 50 percent of workers could resort to WFH without major operational disruptions in 32.2 percent of the enterprises surveyed.

The survey showed that WFH was only feasible for 10.8 percent of the firms surveyed. They were the ones who reported that more than 50 percent of workers could WFH without major disruptions.

“After the ECQ began, many enterprises were forced to close their businesses, and WFH became an oft-used alternative approach to maintain business activity. However, the survey findings revealed that WFH was not necessarily feasible or ideal,” the report said.

By sector, the report showed that wholesale and retail trade had the greatest difficulty practicing WFH.

Firms in wholesale and retail trade accounted for 22.4 percent of total enterprises that reported WFH was not possible for any workers, followed by those in accommodation and food services at 18.9 percent and other services at 15.1 percent.

Firms in information and communication accounted for 29.1 percent of enterprises that reported WFH was possible for more than 50 percent of employees, followed by those in wholesale and retail trade at 16.4 percent and professional services at 11.6 percent.

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