Problems with cash flow are constraining the revenue generation of virtually all Australian SMEs, a new report suggests, indicating it could be having a meaningful flow-on effect on the national economy.
The biannual Scottish Pacific SME Growth Index found a staggering 92.7 per cent of the 1,200 surveyed businesses had their revenue potentially cut because of cash flow problems.
“When asked how much additional revenue could have been generated over the previous 12 months had cash flow been better, only 7.3 per cent responded that better cash flow would not have led to more revenue,” the report noted.
Close to a quarter believed they would have increased revenue by between 10 and 25 per cent had they enjoyed better cash flow.
It comes after a business advisory firm claimed the vast majority of SMEs are having no problem accessing finance, suggesting other factors such as late payments of invoices are weighing on SMEs.
Among the strategies that businesses are using to cope with these constraints, 65.1 per cent are using cash flow forecasting and 50.8 per cent are offering early payment discounts. In addition, 16 per cent are making arrangements with ATO for help, while just 8.6 per cent are conducting credit checks on new customers.
Less desirable strategies are also being employed to manage short-term cash woes, with two-thirds tapping into personal finances such as credit cards, 13.7 per cent forking out bank overdrafts and 12.2 per cent spending more man hours chasing invoices.
Sadly, almost one in 10 (9.1 per cent) admitted reducing their overall sales due to problems with cash flow.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.