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Update: The Australian and New Zealand operations of Bibby Financial Services were acquired by Scottish Pacific Business Finance in late 2015 to create Australia’s largest non-bank invoice finance specialist. Welcome to our website.

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 the last key insight from our March 2018 report:

Strategies SMEs use to deal with cashflow

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The number one piece of consumer advice from financial advisers is to limit the use of high-interest credit cards to fund lifestyle spending.

It is instructive then that many SME owners are also being tempted into using the convenience of credit cards to finance their businesses.

Latest SME Growth Index results show the number one strategy nominated by SMEs to manage working capital is “use personal finance such as a credit card to ease cash flow”.

More than 66% of respondents said they would flash the plastic to ease cash flow problems, ahead of perhaps more prudent choices such as “undertake cash flow forecasts” (65.1%), “offer discounts for early payments” (50.8%) and “make arrangements with ATO regarding tax payments” (16%).

While paying off credit cards in full each month will not attract those 20%-plus interest rates, the occasional slip can result in significant costs.

And given that 16% of respondents see the need to negotiate payment terms with the tax office, it is ironic that at least one major credit card merchant in Australia is promoting its new arrangement with the ATO to pay taxes using their card.

The SME Growth Index highlights that one in four Australian SMEs (24.8%) are having difficulty meeting their tax payments on time.

The combination of a large tax bill together with convenient (but high-cost) credit could prove costly for some SMEs who are either unaware of alternatives to easing cash flow problems, or who are unmotivated to engage these alternatives.

The high number of SMEs nominating the fallback funding option of using personal finances as a main working capital management strategy is concerning, given the broad range of more cost-effective funding solutions available to small business owners.

Tax payments aside, SMEs also report that their problems with cash flow are caused by government red tape, suppliers reducing payment times and customers paying late.

In looking further at what red tape issues are worrying the SME sector, in our September 2017 Index SME owners were asked what government changes would have the most positive impact on their business performance – 24.3% wanted further streamlining of BAS reporting, 22.1% wanted changes to the Fair Work Act and 21.3% wanted company tax rates reduced.

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

Our next release will be available in September 2018 and will be available on our website.

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