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Recently, Xero, a global software platform for small and medium-sized enterprises (SMEs), released its 2025 Singapore SME Outlook Report. The survey, which covered more than 500 local SME owners and decision-makers, revealed that as many as 61% of respondents are facing operational pressures brought about by inflation. Against this backdrop, digitalization is no longer merely a tool for improving efficiency — it has become a decisive factor in whether businesses can maintain their footing and achieve growth.

“Inflation Anxiety” Becomes the New Normal, Putting Pressure on Business Decisions

 

 

According to the 2025 SME Outlook Report, among the SMEs surveyed:

61% of respondents said that inflation and rising costs are currently the biggest external challenges. Behind inflation may lie global economic instability, which affects investment, consumption, employment, and supply chains, ultimately driving up business costs.

48% of businesses reported shifts in consumer demand, with market dynamics becoming more fragmented and the risk of customer churn increasing. Changes in consumer behavior have had a particularly pronounced impact on the wholesale, finance, and insurance sectors, indicating that people are becoming more cautious about spending.

Another 44% of businesses are concerned about “not being able to find the right talent.” The manpower shortage is most acute in the wholesale trade sector and among companies with 21 to 50 employees, making human resources a key bottleneck to expansion.

In addition, businesses also face day-to-day operational challenges such as supply chain disruptions (39%) and changes in regulatory policies (23%).

For Chinese companies looking to establish a presence here, the current environment presents three major pressures: rising operating costs, increasing difficulty in talent acquisition, and tightening compliance requirements.

By contrast, adopting a “light-asset + digitalization + local partnership” strategy from the outset can be more effective in reducing business risks, improving operational efficiency, and strengthening long-term adaptability.

 

“Digitalization” Shifts from a Choice to a Survival Baseline

 

 

Koren Wines, Managing Director for Asia at Xero, noted that even for businesses actively scaling up, many still face operational challenges such as cash flow management, a lack of real-time financial data, and fragmented systems. To improve efficiency, enhance agility, and achieve sustainable growth, companies must address these pain points and build a stronger digital foundation.

The Singapore government places great importance on the digital development of businesses. In recent years, it has driven companies to accelerate their digital transformation through policy incentives, financial support, and a well-developed digital ecosystem, while also raising awareness and recognition of the importance of digital capabilities.

Strong Government Support
The Enterprise Development Grant (EDG) program can provide SMEs with subsidies of up to 70% for eligible projects aimed at enhancing business capabilities, covering a wide range of areas including the implementation of digital systems, process optimization, and consulting services — with its scope extending beyond just digitalization.

Well-Developed Ecosystem
The Infocom Media Development Authority (IMDA) has established a Pre-Approved Digital Solutions list, covering multiple modules such as customer relationship management, human resource management, and cybersecurity, enabling SMEs to “select and use” solutions immediately.

Increased Business Awareness
Driven by government policies and support, businesses have significantly increased their focus on digital transformation. According to the National Business Survey report released by the Singapore Business Federation (SBF) in 2024, 94% of Singapore businesses now regard digital transformation as a key priority, with more than 70% considering it “very important.” This highlights that digital capabilities have become an integral part of business operations.

For outbound-oriented companies, digitalization should not be something to “consider after scaling up” — it should be a fundamental strategy “from day one of setting up operations.” Especially in a complex market like Southeast Asia, with multiple tax systems, languages, and regulatory frameworks, the absence of digital systems often means lower efficiency, greater compliance challenges, and higher costs.

 

Recommendations and Reminders for Companies Expanding Abroad

 

 

Based on SIG’s service experience, we recommend that companies expanding abroad focus on different digital strategies at different stages:

01 Company Registration Stage

• Clarify the purpose of establishing the company (e.g., regional headquarters, service support, sales platform, etc.);
• Choose suitable digital systems based on the business model (e.g., accounting, CRM, HR, inventory and order management);
• Pay attention to the application windows for government support programs (e.g., EDG).

02 Early Operations Stage

• Prioritize the digitalization of core processes such as finance, taxation, and human resources;
• Ensure that the chosen systems can seamlessly integrate with local banks, tax authorities, and regulatory systems — system compatibility is crucial;
• For trade or platform-based businesses, it is recommended to implement export compliance tracking systems simultaneously to support customs declarations and cross-border reporting.

03 Steady Growth Stage

• Leverage accumulated data to perform dynamic analysis of customer behavior, profit structures, compliance records, and more;
• Establish a digital foundation for future financing, audits, or regional expansion, while also reducing accounting and compliance risks.

 

Conclusion

Many companies try to “cut costs wherever possible” in the early stages of setting up operations, only to face higher expenses years later when retrofitting systems and processes. Rather than spending money reactively, it is better to build a robust digital foundation from the outset with a long-term perspective.

Digitalization is not just a trend — it is a mandatory course for companies expanding abroad. Under the current pressures of “high inflation + intense competition + low growth,” a company’s ability to operate efficiently and precisely is being redefined. For Chinese enterprises aiming to establish a foothold and grow in Singapore, building a strong digital infrastructure must be treated as a fundamental capability from day one.