SME confidence remains strong in spite of media perceptions

SME confidence remains high, despite media rumblings around economic concerns, according to the latest Canary in the Coal Mine report from Prushka Fast Debt Recovery.

Prushka’s bi-annual survey found 50 per cent of SMEs are planning for growth, and 65 per cent are confident about the current position of their business.

Roger Mendelson, CEO of Prushka, said results from the survey of 475 small-business operators was an indication that conditions in the sector were remaining steady.

“The results were very surprising but they clearly indicate business confidence amongst SMEs remains high and they continue to plan for growth. However, there is an undercurrent of caution, as these figures have slightly decreased compared six months ago,” Mendelson said.

When asked what they are most concerned about in regards to their business, SMEs called out concerns around profitability (40 per cent) and growing their customer base (39 per cent) as being front of mind.

Nearly half (45 per cent) of SME operators said the state of the economy had negatively impacted their business in the past six months, followed by consumer spending (29 per cent) and increased competition (27 per cent).

“There is a pervading opinion that external macro-economic influences, like the state of the economy and consumer spending, are causing SMEs to act with a degree of caution. These key issues are linked to a degree and are basically SME perception problems that may not necessarily have a direct impact on their business,” Mendelson said.

“SMEs are becoming less reliant on banks to manage cashflow problems, with just 21 per cent saying they are likely to turn to banks for funding; an indicator of good health in the sector. However, there has been a concerning increase in operators relying on their personal funds to supplement cashflow shortages, with one in five still falling back to their personal finances when times get tough, leaving business owners at risk if their cashflow is largely impacted.”

The report also reveals SMEs are spending less time chasing debts and are improving their business efficiencies, with 71 per cent of respondents spending 10 hours or less a month recovering unpaid debts.

“SMEs have continued to work on getting their houses in order and are tightening their business practices, a trend that we have continued to witness. Operators are also keeping a tight hold on their cashflow and are spending less time chasing their debts indicating that cashflow processes are strong for the most part,” Mendelson said.

“There is a tendency to wait for too long to refer overdue accounts to a debt collection agency. More than 60 per cent are waiting more than 90 days before referring outstanding payments, putting these debts at significant risk of not being recovered.”

The construction industry has yet again been called out as the industry which takes the longest to pay invoices, a now 18-month trend, with almost a quarter of respondents noting they experience delays in payment.

“This continuing trend of the construction industry lagging in payment is worrying for SMEs, as the flow-on effects of distress in this sector can impact other industries, particularly as the nation gears up to enter a period of widespread infrastructural change,” Mendelson said.

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