Singapore small and medium-sized enterprises (SMEs) are using artificial intelligence (AI) to claw back time lost to administration, but poor data quality is keeping many pilots from reaching everyday use, according to new research from Xero.
The State of AI in Small Business 2026 surveyed 1,018 owners and senior decision-makers at Singapore companies with fewer than 200 employees and annual revenue of up to S$100 million. The online survey, conducted by Pureprofile on behalf of Xero, ran from 29 July to 5 August 2026.
Admin burden drives AI use among Singapore SMEs
Some 76 per cent of leadership and finance teams lose between three and more than 10 hours each week to manual administrative tasks, the report found. Many are putting AI to work to recover that time. Nearly half (46 per cent) channel the hours saved into growth strategies and market expansion, 38 per cent into product and service innovation, and 33 per cent into upskilling existing staff.
About 52 per cent of SMEs use AI built into core software they already rely on, such as cloud accounting, inventory tracking and customer management tools.
Governance is also taking shape. Some 67 per cent of SMEs have established formal internal usage frameworks, and 90 per cent prioritise vendor data privacy. Of all respondents, 36 per cent will work only with vendors that explicitly guarantee customer data will not be used to train external models, while 54 per cent prefer vendors that offer clear opt-out mechanisms.
Poor data quality stalls AI pilots
Despite the gains, many businesses are struggling to move beyond trials. Poor data quality was cited by 31 per cent of SMEs as the main reason AI pilots failed to reach regular production. Only 18 per cent said they were fully confident that their current software has enough context, including data history, clean ledgers and system connections, for automated decision-making.
Integration costs (38 per cent) and upskilling staff (36 per cent) were named as the top hurdles to expanding AI adoption.
SMEs plan to spend more on AI
Sentiment remains positive. Some 82 per cent of SMEs said AI returns had met or exceeded expectations, and 69 per cent plan to increase total AI spending over the next 12 months. Government support is playing a part, with 63 per cent using digital grants to fund technology deployment and training.
Koren Wines, Managing Director of Xero Asia-Pacific, said the businesses pulling ahead will be those that “pair AI with clean, connected data, strong governance and technology partners they can trust”.
