New research from business management platform MYOB reveals that the majority of Australian SMEs are unaware of some short-term, alternative financing methods that can help address the cashflow issues they are facing.
In detail, 68 per cent of businesses surveyed had never heard of one such non-traditional financing option, invoice financing. In addition, 71 per cent of respondents confused it for another form of financial assistance and only 15 per cent had used it before.
“The lack of awareness signals that at a time when SMEs are feeling the pinch, many could be missing out on a fast and effective way of easing cashflow shortfalls,” Steve Price, head of go to market for financial services at MYOB, said. “It’s so important that SMEs understand what cashflow management tools are suitable for them.”
The research also reveals that 39 per cent of SMEs have faced cashflow issues since March, with a further 48 per cent experiencing finance pressures in the six months prior. As a result, 28 per cent sought financial assistance within the last year and a further 28 per cent plan to do so within the next 12 months to cover critical costs such as wages and supplies (as revealed by 26 per cent of SMEs), buy or upgrade equipment (34 per cent), improve cashflow (30 per cent) or pay for operating expenses (27 per cent).
“Businesses are currently facing really tough financial pressures due to rising costs across wages, energy and fuel, and record high purchase costs,” Price said. “We’re looking at the highest quarterly wage increase in ten years, with our recent research showing over half of Australian SMEs have increased salaries in the past year, while raising employee pay is a priority for four in five businesses.
“Adding to these pressures is the fact that small businesses often have to navigate late payments from customers which can really impact their cashflow,” Price added. “The upcoming holiday season is renowned for being the time of year SMEs face the slowest payment times on their invoices, so keeping a steady hand on cashflow is key to helping a business survive in this climate.”
When applying for business finance, immediacy to cash was an important factor for 32 per cent of SMEs. With invoice financing, businesses can access the amount due on an invoice as soon as it is sent out, avoiding any delays between supplying a service or product and receiving payment.
Upon learning more about invoice financing, 58 per cent of the respondents believe it could be an effective option for them and 53 per cent would consider using it in the near future.
“Cashflow management and access to cash is a critical enabler for SMEs,” Rael Ross, CEO of fintech Butn, said. “Companies seeking ways to handle cashflow or find the capital they need to fund a transaction are often unaware of the financial options available to them to secure the cash they need, when they need it.”
