Cashflow crisis affecting even “healthy” SMEs

New research by SME invoice finance company Apricity reveals that even the more “healthy” SMEs, those larger businesses with significant resources, are also feeling the cashflow crunch as they feel the impact of a COVID-related slowdown and long payment terms.

The survey of 900 commercial finance broker respondents noted that, even before the latest NSW and VIC lockdowns were in full swing, 77 per cent of SMEs indicated that their cashflow had significantly deteriorated over the first half of 2021.

When asked about the possible reasons for this cashflow decline, 77 per cent indicated it was invoice related, of which 27 per cent cited the imposition of longer terms. This finding corresponds with Apricity’s research from late 2020 which found almost half of the brokers (45 per cent) saw that their SME clients struggle with longer terms.

“60- and 90-day trading terms are tough at the best of times but are even more challenging at a time when nearly half the Australian population is under lockdown,” Apricity Finance CEO Linden Toll said. “The infrastructure, construction and mining sectors may be relatively robust compared to others, but many of their smaller SME suppliers also supply other sectors, many of which are struggling. For these SMEs, the prompt payment of invoices becomes even more essential.

“A lot of businesses who are ostensibly healthy and well managed, and who have lucrative contracts with government and some of Australia’s largest companies, may go to the wall simply because they can’t afford to wait three months after the work has completed to be paid,” Toll added.

Toll explained that while there are many specialist, non-bank solutions specifically to help these types of businesses and solutions, many eligible SMEs are unaware of their existence. There is also a reluctance to tap into traditional finance and overdraft solutions, which many SMEs perceive as too expensive and inflexible.

“We could see a longer-term sting in the tail for the economy if this type of scenario stifles the growth ambitions of SMEs and makes them reluctant to take on the big contracts,” Toll said. “I urge SMEs facing these cashflow challenges to talk to their brokers as soon as possible and explore the wide variety of solutions available to help them accelerate their invoice payments and give them the confidence to keep growing.”