SMEs bearish about cash flow and sales

Almost half of small and medium-sized businesses are finding it harder to manage their cash flow and are more concerned about economic conditions.

According to research by Bibby Financial Services in March, 40 per cent of SMEs are finding it more difficult to manage their cash flow than 12 months ago.

The research showed that 25 per cent of SMEs are forced to tackle cash-flow concerns by ceasing to trade with customers who consistently pay late, while 23 per cent spend more time chasing invoices and 19 per cent offer discounts for early payment.

Bibby Financial Services’ SME Cash Flow Index score for March was -3.3 – down from +5.3 in February – which the company said shows that Australian businesses are concerned about cash flow.

Furthermore, 47 per cent of SMEs are more concerned about economic conditions than they were a year ago, while 29 per cent think the Australian economy will contract over the next 12 months.

Mark Cleaver, managing director of Bibby Financial Services Australia and New Zealand, said these views are reflected in “bearish” sales growth expectations, with 28 per cent expecting a decline in sales over the next 12 months – up from 22 per cent in July 2014.

The research also revealed that two in three SMEs intend to maintain or increase business investment over the next 12 months.

Among businesses that intend to borrow over the next 12 months, 32 per cent said they will borrow to fund growth, while 22 per cent will borrow to fund innovation projects.

“This is a positive sign that some businesses, in an effort to counter a stagnant economy, are becoming more proactive in driving growth,” Mr Cleaver said.

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