While SMEs came out on top in the recent Federal budget, they are still facing everyday challenges with almost two thirds indicating they are concerned about their profitability, according to our new research.
A survey of more than 600 SMEs across Australia from more than 30 industries found that one in three business owners are worried about their survival, with the biggest concerns being profitability – 62%, growing their customer base – 51%, and unpaid debts – 29%.
Prushka’s ‘Canary in the Coalmine’ Report found 53% of SMEs felt the state of the economy was impacting their business, with consumer spending – 40% – and pressure on margins – 39% – also weighing on business confidence.
There is a growing level of negativity in the SME sector with owners running a much tighter ship than 12 months ago.
The small business sector makes up a large portion of the Australian economy, yet it is often ignored by official figures and indicators.
With more than half of SME owners focusing on either consolidation or cost cutting this year, there is scepticism within the sector. They are operating very cautiously and limiting their focus on growth which will have a flow-on effect for the wider economy.
Cashflow is also a major concern with more than half of SMEs having the same level of book debts as 12 months ago, and 62% also indicating they are spending the same amount of time following up unpaid accounts.
The main reason for this is businesses not implementing stringent enough collection processes, and it could be costing them thousands.
Almost 61% of SMEs have more than $10,000 in outstanding book debt, yet the average value of debts for 67% of respondents was under $2000, indicating large debts are typically paid or recovered quickly, while smaller debts are ignored or forgotten.
Recovery processes are critical to maintaining a healthy cashflow, but without a stringent system in place, businesses can be left exposed to bad-paying customers.
As the economy tightens, businesses will need to greatly compress their internal collection processes so the time between work and payment is reduced. While smaller debts may seem insignificant, they can quickly add up. Ignoring just five $200 debts means you are giving away $1000 for free; don’t let that happen.
SMEs are further compounding their cashflow troubles, with 55% holding onto their book debts for longer than 90 days before referring them to a collection agency. Waiting longer than 60 days makes recovery of unpaid debts more difficult and increases the risk of them becoming bad debts.