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Cash flow still remains the mother of all headaches for SME owners


Having recently reported how Australian business are having to wait up to eight weeks to get paid by their customers, it is clearly no secret that cash flow is quite an issue for many businesses.

And if we still had any doubts about this, the latest Bibby Barometer – a bi-annual SME sentiment survey surely wipes them away. The survey found 81 per cent of SME owners experienced cash flow issues in the past 12 months and 47 per cent believe their cash flow situation has worsened over the year. Does it get any gloomier than this?

Why are Australian SME owners worried about cash flow?

Many SME owners are worried about how they will secure sufficient funding over the next 12 months. 26 per cent will be looking to pay down an existing loan and 23 per cent intend to refinance existing debt. On the flip side, 19 per cent will seek new funding for growth and 18 per cent will be looking for funding to provide working capital.

Mark Cleaver, Managing Director for Australia and New Zealand, Bibby Financial Services commented, “The real ball and chain that hobbles small business expansion and puts a brake on Australia’s overall employment growth is cash flow.”

“A key contributing factor to cash flow problems is the length of time that small businesses must wait to be paid. 42 per cent say it is taking longer to get paid compared to 12 months ago,” Cleaver explained.

The survey found that 34 per cent of businesses are still waiting for months-overdue outstanding invoices to be cleared while at the other end of the spectrum, suppliers have reduced their terms of trade so that 21 per cent of businesses now have to pay earlier. Talk about being between a rock and a hard place… 

And even looking ahead, many do not see their payment time situation improving soon. 44 per cent expect the length of time they must wait to be paid will increase over the next half year. They clearly could use some of our tips on making customers pay up faster.

What other challenges are Australian SME owners facing?

Take note that we are saying cash flow is the mother of all headaches, and not the only headache business owners have. Along with cash flow, reduced consumer spending, the pressure of deadlines and high fuel costs are also giving business owners sleepless nights.

In fact, these pressures have literally increased stress levels among SME owners in Australia! 53 per cent feel more stressed than they were a year ago, up from 44 percent six months ago.

Economic uncertainty particularly contributes a lot to SME owners’ concern with just over half of small business owners more concerned about global economic conditions than they were a year ago.

“With the Reserve Bank continuing to lower interest rates, it is apparent from our research that a drop in interest rates is not creating the same confidence boost that it did a year or two ago,” Cleaver said.

Compared to 51 per cent six months ago, now, only 48 per cent of business proprietors believe falling interest rates will have an impact on their businesses in the coming 12 months while 20 per cent believe the falling interest rate trend is negative for their business.