The Productivity Solutions Grant (PSG) provides SMEs up to 50% subsidy for pre-approved ERP solutions. This is one of the ways that the Singapore Government encourages local small-to-midsize enterprises (SME) to adopt IT solutions for process enhancements and automations, in bid to improve SMEs’ productivity and revenue. Nevertheless, do you really need PSG for ERP solutions?
Table of Content
The SMEs Go Digital program was launched by Infocomm Media Development Authority (IMDA) to help SMEs build stronger digital capabilities and capitalise opportunities for growth. IMDA’s pre-approved IT solutions are supported under PSG.
1. The Misconception
“Since there is grant subsidy, pre-approved ERP solutions must be cheaper.”
Well, “cheaper” is a relative term – you may get something at lower-than-the-original price or even lower-than-the-market-average price, that does not mean that you get the most affordable or best bargain.
While grants can defray some of your project costs, it is usually capped to the project’s qualifying costs that are determined by project scope and benchmarked against the market average. That means qualifying costs are usually lower than the project costs.
Grant Quantum = (Qualifying Costs) * (up to 50% Subsidy)
Many SMEs are not aware that the up-to-50% grant for ERP category is applied on the qualifying costs instead of the project costs. This means the grant quantum will be much lower than 50%!
These are three reasons why you can skip PSG for ERP project.
2. Lower Qualifying Costs Under PSG
Accounting and ERP solutions are considered basic and foundational IT solutions in the digital economy. Traditionally implementing an ERP system may cost you above $30k. With the mushrooming of more and more cloud-based accounting and ERP solutions in recent years, overall costs have gone down. This lowers the benchmarks used against ERP evaluations, resulting in lower qualifying costs for ERP solutions.
3. Higher Out-of-Pocket Investment
In the most optimistic scenario – assuming a $30k project with 100% qualifying cost, a maximum 50% grant means an out-of-pocket investment of $15k.
Given that the grant works on a reimbursement basis, that means you will need to complete the project and pay your vendor in full before you can proceed to claim the grant from the government. With claims and reimbursement process possibly taking a few weeks if not months, the potential impact to your cash flow is at least $30k cash outlay for a few months before you can recuperate the investment.
Why pay more when you can get the same solution at lower cost? There are packaged solutions, such as the D-Lite and D-Prime, that would cost less than the net-grant amount of pre-approved solutions. You will get to save time, money and potential impact on your cash flow.
4. Risk of Not Being Qualified
For a SME that is already using an accounting or ERP system, you might get very little or even close to zero grant coverage for a replacement system. Bear in mind that the intended use of grant is to help SMEs to adopt IT solutions, not replace what you already have. Once you sign the contract with a vendor, you are legally bound by the contractual terms and conditions regardless of the outcome of your grant application.
Go for packaged ERP solutions that would cost less than the net-grant amount of pre-approved solutions.
Utilise the grant on other IT solutions that will give you higher returns in revenue generation or process automations since every SME has limited funds for adoption of IT solutions under PSG.
Would you rather spend months going through grant application, getting less than expected subsidy and fork out more cash for ERP solution, or simply go for an ERP solution that is even cheaper than the net-grant amount of pre-approved solutions? The decision is yours to make.