Home > SMEs should be encouraged to invest for future productivity, says Bibby Financial Services

SMEs should be encouraged to invest for future productivity, says Bibby Financial Services

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Business financier Bibby Financial Services - Flexible Cash Flow Solutions calls for Federal Budget tax relief for small businesses, after finding that only 30% of small to medium sized enterprises (SMEs) are planning to invest in their businesses in the next 12 months, while 19% plan to sell off assets.

According to Bibby’s National Head of Sales Gary Green, the Federal Government is considering the recommendation of the Business Tax Working Group’s final report that small businesses should be able to offset losses incurred in major investment spending of up to $1 million against tax they have paid in the previous two years. The report proposes that this ‘loss carry-back’ mechanism be phased in from 2013-14, with an initial one-year carry-back period.

Mr Green explains that a recent study by Bibby shows small businesses are even more stressed than they were a year ago. Given that SMEs are weighed down by cash flow concerns with 27% experiencing bad debts in the past 12 months, the proposed legislation will give small businesses much needed relief and allow them to focus on not just survival but also growth, impacting positively on the wider economy.

He also believes that it’s time the focus shifted towards small businesses where insolvency rates are high, since big businesses have been performing reasonably well in recent times, particularly in those local economies allied to mining.

The Bibby Barometer Small Business Survey conducted in February this year showed that more than one in three SMEs would need to downsize or would become insolvent if their two largest suppliers put them on cash-on-delivery status (39%) or if they had to write off a debt of 5% of turnover (37%).

While small businesses are experiencing difficult times, they face the need to innovate and invest to take advantage of structural changes in the economy, at a time when many large businesses, including mining companies and the banks are making record profits, says Mr Green.

According to Dun & Bradstreet’s March quarter 2012 Trade Payments Analysis, the average time taken for the payment of bills by Australian firms was 52.6 days, substantially longer than in pre-GFC times.

This report confirms the Bibby Barometer Survey findings that many small business owners are suffering from late payments while many remain pessimistic about payment terms, with 36% of businesses expecting the length of time they must wait to be paid to increase further in the coming quarter.

The survey found that the use of early settlement discounts to encourage timely payment of invoices was common among small businesses, with 45% of surveyed businesses offering this facility, most commonly within the range of 3-6%.

Conducted in February 2012, the Bibby Barometer Small Business Survey is a national study run twice yearly, surveying primary decision-makers in over 200 non-retail SMEs.

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