What keeps SME owners awake at night?

Cashflow and time management are the biggest pain points for Australian SMEs, according to research conducted by East & Partners for ASX-listed working capital lender Scottish Pacific. The bi-annual SME Growth Index canvassed the views of more than 1200 SMEs with turnovers ranging from $1 million to $20 million.


Cashflow concerns arise from a range of factors including include slow paying debtors, difficulty in accessing bank finance and concerns about their prospects for growth.

Slow paying debtors
Small businesses often find themselves at the mercy of large corporates that use them as a source of working capital. Examples of this include recent decisions by Kelloggs and Fonterra to extend supplier terms from 90 to 120 days.

According to the Australian Competition and Consumer Commission, three out of every four businesses are paid late and an SME only needs one big debtor to go broke or even pay a little late to trigger a cashflow crisis. This is why it is so important to have a relationship with a lender that understands your business, including its cashflow dynamics, but unfortunately for SMEs this is becoming harder to achieve and maintain.

Access to funding
The Scottish Pacific survey revealed that the big four banks, together with their subsidiaries, control 87% of the SME lending market. National Australia Bank is the most prominent primary working capital provider (30%) ahead of the Commonwealth Bank (18%), Westpac (15%) and ANZ (12%).

SMEs are finding it difficult to access bank funding, especially if they are not able to offer real estate security. Despite banks maintaining they are open for business, many small business owners believe that tightened credit standards are making it even harder to obtain bank support. The chart below highlights just how poorly SMEs rate the banks and this sense of alienation is continuing.


Fortunately, SMEs have options in the form of non-bank lenders, including the new breed of online or fintech lenders that are able to offer quick automated decisions and lend without tangible security. More than 20% of SMEs surveyed indicated they planned to fund their growth using a non-bank lender – this was up from 15% in September 2015.

But awareness of non-bank lending options remains an issue especially for the online lenders. According to the latest Disruption Index developed by online lender Moula and DFA Analytics, only 14% of SMEs are aware of fintech offerings, although 10% of SMEs would consider borrowing from one in the next twelve months.

Lower confidence
Almost one in four SMEs surveyed expect business revenues to decline in the next six months and the number of SMEs forecasting negative growth exceeds the number of SMEs who are expecting positive growth. The optimists are concerned about how to fund expected growth whilst the others worry about how they can remain profitable with declining revenues.

Lack of time
More than 55% of respondents feel that they do not have enough hours in the day to do what is required for their business. Nearly nine out of 10 work more than 50 hours a week on average, yet they still say they simply don’t have enough time to get everything done.

As much as they would like to explore alternative ways of funding their business and improving their cashflow, many SMEs just don’t have the time.

And technology hasn’t yet proven to be the boon some may have expected, with almost half of SMEs believing mobile and digital technology has had a negative impact on their work/life balance.

Financial and mental health
In all, life isn’t getting any easier for Australia’s SMEs. The Scottish Pacific SME Growth Index cites financial pressure and lack of time as key concerns but what it doesn’t address is the affect these and other concerns are having on the mental health of small business owners.

There is an increasing awareness of SME mental health issues thanks to the great work being carried out by organisations like Beyond Blue and Heads Up, but more still needs to be done. The report is a timely reminder that we need governments, business associations, advisors, banks and non-bank lenders to all pull together to better support the financial health of our SMEs and the mental health of their owners.


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  • Great article. Thanks for sharing the statistics. I also have a few comments…

    As a business owner since 2005, I’ve come across a number of small business owners who are happy to use services then don’t pay or are very slow to pay. It’s becoming more acceptable for Australian business owners not to pay their bills!

    So I can certainly can sympathise with other business owners that have slow paying debtors and cashflow issues. Here’s how we’ve reduced our risk of slow paying / non paying debtors and how we improved our cashflow:

    – Setting a maximum figure on outstanding total invoices. So the customer/client does not receive more products or services until they have settled their outstanding account.
    – Get upfront pre-payment with as many customers/clients as possible – service plans, fixed price monthly plans, etc.
    – Or obtain part payments (milestone) on bigger projects
    – Pay as many big bills manually, not by automatic debit on your credit card or bank account. This can help greatly with cash-flow timing issues.
    – Ensure that GST payments to the ATO and employee entitlement and taxes are correctly budgeted for, and set aside in a separate bank account.

    Often cashflow problems are caused by not up-to-date books (accounts) and loose financial management. Hopefully, the above can be of some use.