Cashflow and funding worries hurt SME confidence

Scottish Pacific survey finds SMEs, including in transport, troubled by uncertainty

Cashflow and funding worries hurt SME confidence
Issues of time and money are causing SME owners angst


The lack of a consistent economic direction and the doubts surrounding events nationally and internationally are combining to keep small to medium enterprises (SMEs) off balance, a survey for financier Scottish Pacific finds.

But deep concerns closer to home are causing their owners up at night.

The Scottish Pacific SME Growth Index, compiled by research firm East & Partners, surveyed 1,200 such businesses across all states and key industries, including transport, which, according to a spokesperson, makes up about one-third of respondents.

Its headline findings are that SME owners are working up to 80 hour weeks, are losing sleep about cashflow and almost one in four are predicting revenue to decline through to the end of the year.

Scottish Pacific CEO Peter Langham sees the results showing that SME confidence has taken a hit despite the resilience of the sector, which according to ABS statistics employs almost half of the 10.7 million Australians in the workforce.

"Over the past two years, SMEs predicting revenue decline have almost doubled – 13.2 to 24.2 per cent – while those predicting increases have halved their growth forecasts – 8.6 to 4 per cent," Langham says.

"The current environment is clearly placing pressure on Australia’s small to medium business community."

For the first time since the Index began in September 2014, SMEs forecasting positive growth, at 48.4 per cent, outnumber those forecasting negative growth or no change, at 51.6 per cent.

"SMEs nominated cash flow as the most stressful element of business," Langham says.

"They cited credit conditions as a key barrier to growth.

"With the Index highlighting that cash flow keeps 72.5 per cent of respondents awake at night, it’s crucial for these leaders to find the right funding to support their business.

"Businesses are increasingly looking beyond the banks to fund growth and to help ease cash flow concerns.

"From this time last year, there has been a 30 per cent increase in SME owners planning to fund their growth using a specialist non-bank lender, with one in five now indicating their intention to do so."

The survey took place in July and August, in the aftermath of the federal election and UK ‘Brexit’ referendum.

Other findings round five of the Scottish Pacific SME Growth Index include:

the largest round-on-round and year-on-year percentage changes since reporting began in September 2014. 48.4 per cent of SMEs forecast growth in revenue, compared with 59.6 per cent this time last year. And 24.2 per cent forecast negative growth, compared with 16.8 per cent last year.

the top three concerns were cash flow (72.5 per cent), not having enough time to get things done (55.2 per cent) and customer or supplier issues (39 per cent). 17.3 per cent were worried about disruption of their business model, and 13.3 per cent cited staff issues.

a 50+ hour week is standard for most SMEs (88.8 per cent). Almost half of SME owners and senior managers (43.7 per cent) are spending 60 to 80 hours a week working on their business, which equates to 12+ hour days, six days a week.

almost half of SMEs (44.6 per cent) believe mobile and digital technology has had a negative impact on their work/life balance. Only 15.7 per cent of small businesses believe it has led to better work hours or flexible working conditions.

almost half (48.9 per cent) of SMEs report no plans to introduce new products and services during the second half of 2016, up from 33.7 per cent a year ago. This may have been influenced by uncertainty following the federal election.

since Septembr 2014 there has been a steady increase in SMEs looking to borrow from specialist non-bank lenders. This has become more marked in the past year: 19.6 per cent plan to fund their growth using a specialist non-bank lender, a 30 per cent increase from the figure of 15.1 per cent in Sept 2015.

Australians are still keen to start their own business, despite barriers and tough conditions. The Index shows one in 10 SMEs are in start-up phase, a consistent figure since data was first collected in September 2014.

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