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SMEs suffer a cash flow crunch

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Every business knows cash is king and for many Australian small- and medium-sized businesses (SMEs) cash flow issues are threatening their very survival. According to the latest Bibby Barometer Small Business Survey from debtor finance company Bibby Financial Services, over the past 12 months, 22 per cent of SMEs said cash flow shortages had threatened their survival. Twenty-six per cent of business owners surveyed said they had difficulties paying suppliers on time, and 24 per cent said they had difficulties making tax payments. Interest rates were also a key concern with 54 per cent stating an interest rate hike would hurt their business.

Not helping the cash flow situation is lengthy wait times to get paid. Of those surveyed, 49 per cent said they had experienced delay in payment, while 27 per cent said they had experienced bad debts over the past 12 months.

“Not surprisingly, many remain pessimistic about their future payment terms,” says Bibby Financial Services managing director Greg Charlwood. “Over a third (36 per cent) expect the length of time they must wait to be paid will increase further in the coming quarter.”

And global economic problems aren’t helping the situation – 47 per cent of SMEs reported they were more concerned about the global economy than a year ago.

“Expectations regarding sales growth have deteriorated and cash flow is more difficult,” says Bibby Financial Services managing director Greg Charlwood. “It is clear that current global economic conditions are not only impacting large corporations but also filtering down to Australia’s SME sector.”

Other major business headaches include staffing issues (40 per cent indicated this was a concern), a lack of work-life balance (40 per cent), and Government red tape and tax administration (39 per cent).

This comes at a time when the Federal Cabinet is reviewing a package of reforms for small business which includes tax relief and other measures to reduce red tape.

“We believe that these measures are indeed desirable. The proposed package of reforms will start to address the major small business headaches identified in our survey, and will provide some much-needed relief for the SME sector,” says Charlwood.

For advice you can trust book a complimentary first appointment with Switzer Financial Planning today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Tuesday, March 27, 2012

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