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Cashflow shortages threatening SMBs future, report finds

Cashflow shortages, interest rates hikes and increasing global economic concerns are all threatening the livelihood of local SMBs, a new survey has found.

According to The Bibby Barometer Small Business Survey, the survival of 22 percent of SMEs has been threatened in the past 12 months due to cashflow issues, with delayed payments for businesses one of the main contributing factors.

The report found a staggering 49 percent of small business decision makers have experienced delays in payment and 27 percent have experienced bad debts.

Bibby Financial Services Managing Director Greg Charlwood said the survey revealed  “expectations regarding sales growth have deteriorated and cashflow is more difficult.”

The survey also found delayed payments is a growing concern faced by business owners as well as “too much bank security”, forcing owners to seek alternative sources of credit.

“Not surprisingly, many remain pessimistic about their future payment terms. Over a third (36 percent) expect the length of time they must wait to be paid will increase further in the coming quarter. The majority of small business decision makers are of the opinion that banks require too much security these days. As a result, many small businesses are looking beyond the traditional sources of funding, with 34 percent more likely to seek credit from sources other than banks in the next 12 months,” Charlwood added.

Charlood said cashflow management ranks at the same level as three other major “headaches” faced by business owners which are; staffing issues, a lack of time to enjoy family life as well as Government red tape and tax administration.

Business owners also revealed they believe an interest rate hike of 25 basis points will impact or seriously impact their business and 47 percent believe the looming threat of the current global economic situation is more of a concern now than 12 months ago.

“It is clear that current global economic conditions are not only impacting large corporations but also filtering down to Australia’s SME sector,” Charlwood said.

However, it’s not all bad news for SMEs, with Charlwood welcoming the Federal Cabinet’s proposed package of reforms for small businesses, including tax relief to commence in July 2012, in addition to other measures to reduce red tape and provide exemptions from unfair dismissal laws.

“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,” he said.

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Claire Hibbit

Claire Hibbit

Claire Hibbit is an intern at Dynamic Business and has just completed a Bachelor of Journalism, majoring in Communication and Media Management from the University of South Australia. She enjoys all things media and travelling.

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