Fight back in cashflow battle

Cashflow has once again rated as the chief concern for SMEs in a new report released today.

The survey was compiled by Bibby Financial Services and research firm CoreData, and 850 Australian SMEs rated their confidence going into the next 12 months.

Top cashflow concerns for Australian SMEs:

  • 1 in 3 (36 per cent) SMEs reported cashflow is more difficult to manage than 12 months ago. Almost half believe there has been no change in the past 12 months.
  • 1 in 4 (27 per cent) of SMEs have had an outstanding invoice with a client/ customer in the past 12 months.
  • 1 in 6 (16.8 per cent) of SMEs will spend more time chasing invoices – and 1 in 10 (10.6%) will offer early settlement discounts in the next six months.
  • In the past 12 months 27 per cent have suffered late payments from a client, 15.3 per cent have had a bad debt because a customer has gone bust, and 12.6 per cent have had a client negotiate to pay an invoice in monthly installments.

When it comes to cashflow issues experienced in the past 12 months, the most common reason was customers being slow to pay.

Beyond this, declining margins and issues with government ‘red tape’, compliance and tax administration also rated as cashflow hurdles.

Mark Cleaver, Bibby Managing Director, Australia and New Zealand, commented that these problems are forcing some SMEs to waste time chasing late payments. “We also found that some SMEs (11 per cent) are offering discounts for early payment and 15 per cent of SMEs are even refusing to trade with some clients due to non payment,” Cleaver said.

Managing Director of commercial credit reporting bureau CreditorWatch, Colin Porter, said that offering discounts for early settlements can eat into profits and riskier accounts often won’t pay quickly, regardless of the discount.

He added that cashflow and the associated credit risk on slow paying customers continues to be one of the main hurdles stalling business growth.

“To help avoid these issues, SMEs need to be more diligent upfront when bringing customers on board. Performing credit checks and monitoring their customers for indicators that might identify an inability to pay their bills on time will go a long way to help eliminate outstanding debts and improve cashflow.”

Statistics published this week by CreditorWatch identified that payment defaults being registered by SMEs had increased by 12.5 per cent, while the value of defaults increased by over 18 per cent (Q1 2014 vs. Q1 2013).

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