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Our Scottish Pacific SME Growth Index is a twice-yearly snapshot of Australia's small to medium sized business sectors showing cashflow issues that many businesses face today, below is one of six key insights found in our September 2019 report:

The biggest impact trusted advisors have on SMEs is providing them with confidence about strategy direction (nominated by 38.7%).

This was one of three positive impacts SMEs independently nominated outside of set questionnaire responses, the others being providing access to credit (11%) and helping with asset sales (8.1%).

SPC11500 SME Growth Index Social Visuals AW5

 

Advisors help SMEs access funding

More than one in 10 businesses look to trusted advisors for access to funding (13.1% of SMEs with $10-$20m turnover, and 9.8% of those in the $1-$10m range).

This is a business service that could be nurtured, for the benefit of the SME sector. The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) this year partnered with Scottish Pacific to research and produce a

Business Funding Guide (targeting accountants, book-keepers, brokers and other key SME advisers) and a companion FitsME Guide (targeting small business owners).

The guides aim to increase knowledge about business funding options and help SMEs get their businesses “fit for finance” so that loan applications and equity requests are less likely to be rejected.

From the set responses, the Index found the key areas of advisor impact were staff and hiring decisions (named by 22.2%) and guiding new asset and equipment purchasing decisions (14%).

Trusted advisors were also credited with reducing costs and overheads (nominated by 10.2%), preventing insolvency (7.9%) and improving revenue (7.6%).

 

Accountants have the greatest positive impact

Despite accountants not being the first port of call for most SMEs, SME Growth Index research has shown accountants have the most positive impact of all advisors – 82.9% of SMEs who nominated accountants as most trusted advisor said they had a positive impact on the business.

This placed accountants well ahead of the positive impact reported for family members (68.8%), business colleagues (58.8%) and friends (27.1%).

Accountants are more likely to be most trusted advisors to growth businesses with declining revenues (8.2%) and growth and stable ones (6%), and least likely to be nominated by start-ups (2.3%) and those consolidating (3.3%). This may be understandable: start-ups may not have the funds to seek expert advice.

When it comes to trusted advisors, growth businesses are almost three times as likely to name an accountant over a bank manager, and twice as likely to name their broker ahead of their bank manager.

The business phase most likely to name a broker as trusted advisor is that of contracting businesses (7.4%). Around 4% of growth, stable and consolidating businesses rely on a broker for business counsel, but fewer than one in 100 (0.8%) of start-ups do.

Smaller SMEs, in the $1-10m turnover range, say their advisors have the biggest impact in hiring decisions, major purchases and giving them confidence in general business direction. For the larger SMEs, trusted advisors are more likely to have a positive impact by improving revenue and reducing costs.

When the impact of a trusted advisor is considered through the lens of business age, enterprises over 10 years old are twice as likely as those under 10 years to have their trusted advisor prevent insolvency.

The older business category also relies more on advisors to reduce costs and help with asset sales, whereas younger enterprises are more likely to lean on advisors for confidence in business direction and help with staffing decisions.

 

What makes an advisor trusted?

The most important criteria nominated is real-world business experience (23.6%), rated ahead of independence, objectivity and truthfulness (22.1%). Other key factors include having a long-standing relationship (19.8%) and the ability to refer useful contacts and introduce to broader networks (12.1%), rated ahead of sector-based knowledge (8.2%), providing access to finance (7.3%) or being an investor in the business (6.1%).

 

Like to know more? To download the latest copy of our SME Growth Index, click here.

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