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Across several sectors, there are modest increases in salaries that signal SMEs’ commitment to attracting and retaining skilled talent.
Small and medium-sized enterprises (SMEs) have been the backbone of economies around the world, creating jobs and driving innovation in their communities.
A survey by Instarem, titled the 2024 SME Spend Barometer analysed anonymised and aggregated transactional data of 700 SMEs between January 2023 to August 2024, across Singapore, Malaysia and Australia, with the goal of providing insights into where SMEs are allocating their resources and how these trends relate to broader market conditions.
The report, launched on 28 November, and attended by HRO, revealed three key trends that define SME spending behaviours this year:
- Balancing talent and costs: Across several sectors, there are modest increases in salaries that signal SMEs’ commitment to attracting and retaining skilled talent – yet even here, companies are carefully balancing growth and costs.
- Prioritising technology and innovation: IT and digital solution spending grew 29%, reflecting SMEs’ focus on long-term growth and operational efficiency—even in cost-cutting sectors.
- Reinvesting in physical spaces: Office expenses rose 16% as businesses sought to balance returning to physical spaces with hybrid work models.
Here is a closer look of the insights from the survey, according to country data:
Singapore
Singapore's SMEs are taking a strategic approach to spending in 2024, adapting to the economic landscape. While some sectors are thriving, others are scaling back.
Thriving sectors:
- Retail and wholesale (+43%): The steady expansion of the wholesale sector, a crucial economic driver, is fueling this growth.
- Real estate and leasing (+52%): Demand for commercial real estate, as businesses return to physical offices, is benefiting this sector.
- F&B (+14%): Sales are rising across the board, from restaurants to cafes.
Scaling back sectors:
- Financial services (-38%): This sector is adjusting to evolving consumer preferences and increased competition.
- Online retail (-24%): Similar to financial services, online retail is facing challenges from changing consumer behaviour and heightened competition.
- Industrial manufacturing and construction (-18%): This sector is also adapting to economic headwinds and industry-specific factors.
Overview of Singapore’s spending
- Office expenses rose moderately across all sectors, with retail, wholesale, business services, and real estate and leasing leading the way. This signals the enduring importance of physical spaces among SMEs.
- Salary spending stayed flat in 2024, reflecting a mixed trend. While some industries scaled back, others invested in talent and external expertise, with media and marketing (+13%) and business services (+2.69%) increasing spending on third-party advisors.
- Export fees decreased by 27% in 2024, suggesting SMEs scaled back on expansion due to economic uncertainties, rising costs, or a shift towards domestic operations. However, with improving business sentiment, future expansion may be on the horizon.
Yogesh Sangle, Global Head, Instarem shared:
"By adopting digital solutions, SMEs can not only reduce inefficiencies but also gain greater control over their cash flow; ultimately, enabling them to navigate global markets with confidence, streamline fund transfers, and reinvest those savings into areas that drive real growth."
Malaysia
Malaysian SMEs are increasingly optimistic about their spending in 2024, with seven out of the top ten industries experiencing growth.
Key growth sectors:
- Business services (+36%)
- F&B (+48%)
- Retail and wholesale (+16%)
- Fashion and textile (+200%)
The fashion and textile industry's significant growth are likely attributed to a shift away from traditional payment methods.
Scaling back sectors:
- Consumer products and services (-22%)
- Education (-52%)
These sectors are adopting a more cautious approach to spending.
Overview of Malaysia’s spending
- Several sectors, including F&B, retail and wholesale, and IT and software services ramped up export payments in 2024, as they look to scale and tap into global markets. The Halal industry, valued at $2.8tn, is a key market for F&B manufacturers to capture international opportunities.
- For multiple sectors, information service charges emerged as the biggest expense in 2024. Industries like business consultancy, consumer products and services, and IT and software services all shifted their spending priorities towards data-driven tools, analytics, and digital solutions, reflecting a broader trend toward digital transformation and innovation across SMEs.
- While IT and software services and retail and wholesale increased office expenses, media and marketing and consumer products and services cut back. This highlights the importance of adapting to industry-specific needs and market conditions.
Australia
Australian SMEs have shown resilience in the face of economic challenges. While inflation and decreased consumer spending remain concerns, the January-August 2024 period saw positive trends in transaction volumes for many industries.
Strong growth sectors:
- IT and software services (+35%)
- Media and marketing (+32%)
- Accountancy (+32%)
- Education (+19%)
These sectors experienced significant growth in transaction volumes.
Scaling back sectors:
- Financial services (-11%)
- Retail and wholesale (-57%)
These sectors experienced declines, potentially linked to decreased consumer spending.
Despite the challenges, the overall growth in transaction volumes is a positive indicator. Australian SMEs are demonstrating adaptability and are well-positioned to capitalise on future economic opportunities.
Overview of Australia’s spending
- In 2024, IT spending across Australian SMEs varied by sector. IT and software services, and business consultancies, and accountancy increased IT investments, while consumer products and services, and financial services scaled back or maintained cautious spending.
- The data on office expenses reflects strategic decisions in 2024. While some sectors like IT and Software Services, business services, and financial services increased spending, media and marketing and business consultancies reduced their office investments. This highlights the diverse approaches to office strategies, with some leaning into physical spaces and others optimising costs through remote and hybrid work.
- Average salary payments rose modestly (+3.1%) in 2024. With a tighter employment market, SMEs may strategically invest in retaining top talent to maintain a competitive edge.
Michael Minassian, Head of Instarem, APAC, said that rather than cutting costs, many businesses in Australia are adapting and preparing for long-term growth through continues investments in tech, infrastructure and talent.
“It is this ability to navigate uncertainty with strength that will ensure they remain vital contributors to the economy for years to come.”
A panel of distinguished leaders from the SME sector provided valuable insights during a panel discussion at the launch event. Key topics included:
Challenges SMEs face in adopting AI
Stephanie Choo, Founder, EDEN + ELIE
"As a small, independent brand, there's not a lot of pushing. So whenever the economy kind of rocks in any direction, you're like a small canoe that's always trying to balance in the rapids."
She shared her concerns that with the rising costs of the rising cost of the digital e-commerce space, because everyone had gotten into that space during COVID, the physical channel of retail had become much more lucrative for their brand, at least.
"The way that we think about spending, about rising labour costs has been on my mind as a business owner."
Hugo Mas, Sales Leader, APAC - SMB, Deel
"For SMEs, we see people keep on investing, and they just invest in a different way. They invest a lot to optimise the situation, how they can optimise their business and their operations, to make sure that they keep on growing, (and) that they still have some flexibility.
"So that if things don't go as planned, they are not sinking the business. But at the same time that they remain competitive."
He added that when looking at the numbers, the additional investment, particularly in digital and IT, was significant. He found it striking that the focus was on investing in these areas to elevate the business to the next level and to introduce the necessary flexibility for future challenges.
The impact of adopting AI as an SME
Yogesh Sangle, Global Head of Instarem
"We started using AI for content some time ago, and what happens is that you get that early advantage, and (after a period) everybody else catches up, and then you have to look at the next big thing to do.
"And that's not easy, especially for small and medium enterprises, because a they're behind the curve. When they're doing a catch up, others are going further ahead, so their cost keeps on going up. So that's a concern for a lot of SMEs."
"There's a lot of noise around AI, so there's almost this force to implement (AI), but at the same time, real gains are few and far, so there is still a long way to go."
Stephanie Choo, Founder, EDEN + ELIE
"I want to make a distinction that there's a difference between building a business and building a brand.
"I actually want AI because it helps me to expand my brain so that I can build something, I can get something that is more like me. And that's great when you're running a small company on your own and you just need a clone of yourself, and you can get that through AI.
"But if I needed a divergence of opinions, then I need people."
"I have not been able to find AI, maybe I just haven't found the right people to actually handle my customer touch points the way like a human being would, because there's so many different reasons, and for us, investing in our brand and investing in how the customer feels, and all of that is so important to me."
Importance of strategic flexibility in project selection and hiring practices
Liru Chan, SMB Leader, formerly Visa, PayPal and Google
"I think doubling down on what makes your brand or your company truly unique and that value that you bring to your customer, I think that's really key. In times like this, a lot of companies want to play safe, but actually it's an ideal opportunity for you to further differentiate yourself and put your brand out there.
"From a marketing perspective, I think this is opportunity to really think about the brand and think about how you want to truly differentiate."
"The other thing also is knowing where your profitability levers come from. Do you know who are your most profitable customers? How do you make them even more profitable? I think getting new customers is easy but retaining them and upselling them or cross-selling them, expanding the basket of goods is not that easy."
READ MORE: Key HR areas for AI transformation in 2025: Talent acquisition, employee experience, and more
Infographics / Instarem
Lead image / Journalist's own
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