SMEs reveal top five pain points

  • By Christine St Anne

Cash flow and chasing payments were among the top five pain points in 2017 for small businesses, according to a survey by Xero.

Expanding their customer market, hiring the right people and taking on too many administrative tasks were also among the key concerns for this sector.

The Xero Small Business Insights survey, launched last year, looks at the data of Xero’s small business customers, analysing metrics such as cash flow, employment and global trade.  

According to the report, by the beginning of 2018, nearly half (49.4 percent) of Australian small businesses were cash flow positive; up 2.8 percentage points year-on -year.

“While that conversely means more than half of small businesses were in the red, January is typically a cash-strapped month, and the improvement from the previous January (46.6 percent cash flow positive) indicates the trend is moving in the right direction,” the report said.

A key contributor to cash flow for businesses is getting paid on time by their customers.

The report acknowledged that “lax payment times are the bane of small business— and the government knows it,” which is why the it pledged last year to pay all small business invoices within 20 calendar days, starting July 2019.

Indeed, the research found that the pledge has led to positive change over the past year.

Small businesses waited an average of 38.8 days to be paid in January 2018 (for invoices on 30-day payment terms).

While still above the 30-day terms, it is a major decrease on two years ago. And almost every month in 2017 saw an improvement in payment times versus the prior year. This suggests that a positive trend that is likely to continue.

Positive outlook

The government’s pledge also came at a time when big businesses were also in the spotlight for paying small businesses late.

The Australian Supplier Payment Code, launched last year binds businesses to pay within 30-days of receiving an invoice. Signatories to the code include the big four banks.

The small business ombudsman is also pushing for better payment terms after its Payment Times and Practice Inquiry revealed in April last year that payment delays from big business to small businesses were moving out from 30 days to 45, 60 and in some cases 120 days.

In terms of the outlook for the sector, key health metrics for small businesses are positive, with the report citing the fall in payment terms as a key positive trend.

Government initiatives announced in the 2017-18 budget such as tax concessions and the continued asset write-off were also positive.

“There is still some way to go, however, in evening the playing field for small businesses against larger competitors, and ensuring they remain a key growth engine for the Australian economy,” Xero managing director Trent Innes said.

“With some of the key expected changes in government policy around the corner, and a continued focus on payment terms and affordable capital, Australia’s small business sector can become stronger than ever.”