cash flow SME late payments

Cash flow and growth expectations by industry: A summary of the SME Growth Index

By mihiri Nov 14, 2018 Comments

Build it and they will pay simply doesn’t ring true for the construction industry. The latest Scottish Pacific SME Growth Index (a survey of 1200 Australian SME leaders conducted in July 2018) found that cash flow is most concerning to the construction sector, with 86 percent of construction respondents nominating cash flow as the number one reason they lose sleep at night.

Cash flow and time are the top two concerns in every industry

Cash flow was by far the biggest worry for business leaders across all industries, with around 79 percent of all SMEs nominating cash flow as their top concern. Late paying customers and compliance with government ‘red tape’  were the main reasons for cash flow problems. And with suppliers reducing payment terms, it’s no surprise that more than 80 percent of retailers, miners, and manufacturers are also kept up at night by cash flow concerns.


Source: Scottish Pacific SME Growth Index September 2018

Although 51 percent of SMEs report positive growth (the highest rating since the first half of 2016), poor cash flow is estimated to have cost the Australian SME sector A$234.6 billion in lost revenue in 2017, or an average of 17 percent more revenue per business. The lack of working capital negatively affected SMEs opportunities to hire new staff, acquire new equipment and take on new work. Despite the many alternative finance options now available, 89 percent of respondents report dipping into personal funds to invest in the business.

A clear runner-up for top stressor was lack of time. An average of 64.8 percent of SMEs reported they don’t have enough time to do what is required for the business. Most pressed for time were property and business services. The mining and transport sectors are putting in the longest hours, with around 67 percent of these owners clocking 60 to 80-plus hours per week

For SME owners, the 40-hour week is a myth, with three quarters working 50 to 80-hour weeks and around one in five regularly clocking 80-plus hours.


Source: Scottish Pacific SME Growth Index September 2018

Manufacturing

  • Manufacturers are pessimistic about revenue growth, with only 46 percent predicting an average of 2.2 percent growth over the next six months.

  • One third of manufacturers predict their revenue will decline by 8.8 percent on average.

  • 90 percent thought better cash flow would have delivered a revenue boost of 5-50 percent.

  • Almost 2 in 3 business owners are working 60-plus hours per week.

Wholesale

  • Fewer than half of SME wholesalers expect growth; more than a quarter expect a revenue drop by an average of 7.3 percent.

  • The biggest issue keeping owners up at night is cash flow.

  • 43 percent of wholesale business owners are working 60 to 80-hour weeks.

Construction

  • Cash flow concerns are the most prominent in this sector.

  • This sector has above average expectations of revenue growth.  54.5 percent of construction SMEs are predicting positive revenue growth over the next six months, at an average 4.8 percent improvement.

  • Only 5 percent of the sector reported that cash flow could not have been better.

  • Staff, supplier and customer issues, and business model disruptions were more of a problem for construction than any other sector.

Business services, labour hire and property

  • Identified as one of the most robust sectors, with fewer than one in five predicting revenues to decline in the next six months.

  • More than 56 percent are predicting revenue growth at the highest sector average of 7.9 percent.

  • Only 5.6 percent of the sector thought cash flow could not have been better.

  • One in 20 felt they could have achieved 50-100 percent improvement in revenue if cash flow had been better.

Transport and storage

  • More transport business owners are working the longest hours (80-plus hours per week) than any other sector.

  • 51 percent predict positive revenue growth of an average 5.1 percent over the next six months.

  • One-fifth predict a revenue drop by on average 3.3 percent.

Mining

  • Mining SMEs are the most positive about revenue growth - over 56 percent anticipate 5.8 percent growth over the next six months.

  • Mining SMEs are more likely than any other sector to be worried about the potential for sudden disruption of their business model, and about meeting government compliance.

  • Fewer than 5 percent in the sector work a 40 to 50-hour week, with almost half working 60 to 80-hour weeks (longer hours than all other sectors).

Retail

  • The retail sector is the most pessimistic of all the sectors about revenue growth. Fewer than 45 percent expect growth, one-third expect revenue will fall, and a quarter expect revenue to stay the same.

  • Cash flow is the biggest concern for retailers; only 5 percent say cash flow could not have been better.

  • More than one in five retailers are working more than 80 hours per week, with close to half putting in 60 to 80-hour weeks.

The final word:

The Scottish Pacific SME Growth Index clearly shows that despite an improved optimism around business growth, cash flow problems continue to hold back business. Lack of working capital is preventing businesses from achieving their revenue potential, and finding enough time to do everything is a major stress on business leaders. Improving cash flow and productivity offer huge potential to ease the major burdens on business owners targetting growth.


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cash flow SME late payments

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