Cash flow is one of the biggest keys to any businesses long term success. As the saying goes, Cash is King.
The Invoice Market’s SME Cash Flow Crisis Report shows some alarming results. They have concluded there is a massive $76 billion of outstanding debtors owed to Small and Medium Enterprises (SMEs). That’s $76,000,000,000.
Statistics produced by the Australian Bureau of Statistics indicate half of all businesses go out of business in the first three (3) years of operation. According to Australian Securities and Investment Commission (ASIC), in 40% of business failures, poor cash flow is citied as being a contribution factor.
The numbers are as scary as they are staggering.
Poor cash flow affects far more than the business owner’s hip pocket. If a business has been paid for its work, this can flow through to the ability to pay staff and suppliers. Poor cash flow can also prevent a business from being able to take advantage of opportunities as they arise and restrict growth.
Not everything can be easily quantified in dollar terms. The impact of waiting to be paid builds stress not just for the business owner which can be very detrimental to their physical and mental health.
If a business owner is stressed, they are likely to inadvertently pass this on to their team affecting staff morale (particularly if they are worried about whether or not they are going to be paid) and ultimately the culture of the business.
Part of the problem for small business may well be the laid-back attitude Australia is famous for.
“She’ll be right mate”.
Well not always. Your customers may well have good intentions and they probably will pay you. Eventually. In the meantime, you’re funding their business and their lifestyle. Probably without charging any interest or late fees.
Sadly, there are those who think small business can be treated like an interest free credit card. I’ll just borrow from over here to pay that bill over there. Wonder what would happen if they treated a bank or any other lender that way? Would a bank be happy to wait without any extra payment? Unlikely.
Many small business owners either don’t know how much is owed to them or how long on average it takes for them to be paid for the work they have done or goods they have sold. How about you?
If you need help with strategies to manage your debtors and improve your cash flow, we’d love to help.