Home > Survival of Australia’s SMEs threatened by cash flow issues, reveals Bibby survey

Survival of Australia’s SMEs threatened by cash flow issues, reveals Bibby survey

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The latest Bibby Barometer Small Business Survey conducted by Bibby Financial Services - Flexible Cash Flow Solutions reveals that the survival of 22% of SMEs was threatened over the past 12 months due to cash flow shortages.

The Bibby Barometer Small Business Survey is a national study run twice yearly to survey primary decision makers in over 200 non-retail SMEs.

Key findings from the survey conducted in February 2012 include the increasing concern of Australia’s small business owners about the current global economic situation with 47% more concerned than they were a year ago.

While 26% of decision makers had difficulties meeting liabilities to suppliers on time, 24% had difficulties making their tax payments. The majority of SMEs were also worried about interest rates with 54% believing that an interest rate hike of 25 basis points will impact their business.

A Bibby Barometer Index was constructed from the overall Bibby Barometer Small Business Survey to measure small business expectations for a healthy business environment based on intention to invest in the business, expectations of sales growth, ease of managing cash flow, business confidence, and levels of business stress.

Since the previous reading in July 2011, this Index shows that small business expectations have decreased overall by 6%.

According to Greg Charlwood, Bibby Financial Services Managing Director, the second Bibby Barometer Index has revealed that expectations regarding sales growth have deteriorated and cash flow is more difficult with current global economic conditions not only impacting large corporations but also filtering down to Australia’s SME sector.

The Bibby Barometer Small Business Survey reveals that managing cash flow (39%) ranks at the same level as three other major business headaches: staffing issues (40%), a lack of time to enjoy family life (40%), and Government red tape and tax administration (39%).

The survey shows that delayed payments are a contributing factor to business cash flow problems, with 49% of small business decision makers experiencing delays in payment, and 27% experiencing bad debts in the past 12 months. Over a third (36%) in fact expect that the length of time they must wait to be paid will increase further in the coming quarter.

Another sore point with a majority of small business decision makers is the increasing requirement for security by banks, leading many small businesses to look beyond the traditional sources of funding. At least 34% of the respondents are more likely to seek credit from sources other than banks in the next 12 months.

The Bibby Barometer Small Business Survey also found that small businesses with 10 to 19 employees (63%) and those with turnover of $1M or more (64%) are most likely to feel that the banks require too much security.

Consequently, factoring is growing in popularity, since it gives SMEs almost immediate finance when they bill their clients without needing to provide their home or commercial property as collateral.

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