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Australian small businesses losing $5.8 billion each year



Accounting | Apps | Business Tech | Cashflow | Featured | Managing | Small Business | Tax | Tax, Accounting and Bookkeeping

By Loren Webb

Insufficient cash flow means lost opportunities 

  • Australian small businesses have lost opportunities worth an estimated $5.8 billion due to insufficient cash flow1
  • Nearly half (46 per cent) of Australian small business owners have been at risk of being unable to pay their employees1
  • More than a quarter (26 per cent) of Australian small businesses that have experienced cash flow issues have done so in the last year1

Australian small businesses are losing out on opportunities worth thousands of dollars due to insufficient cash flow, with nearly half admitting they’ve been at risk of being unable to pay their employees1, new research by global cloud accounting software leader Intuit® has revealed.

A new study1from Wakefield Research, commissioned by Intuit Australia, surveyed 500 small business owners in Australia and revealed half (50 per cent) have lost AUD $10,000 or more by foregoing a project or sale because of issues created by insufficient cash flow. Overall, Australian small businesses have lost out on $5.8 billion as a result of cash flow constraints.

According to the Wakefield study, nearly half (46 per cent) of small business owners have been at risk of not being able to pay their employees by payday, and the majority (54 per cent) of respondents have been kept up at night by concerns about cash flow, even if their company has not suffered from it.

The Wakefield study also found:

  • A clear majority (63 per cent) of Australian small businesses have experienced cash flow issues more than once in the last 12 months.
  • In instances where a business has been at risk of not being able to pay employees by payday, more than a third (35 per cent) have resolved the issue by paying their employees late.
  • Nearly a third (31 per cent) of small business owners in Australia estimate their company currently has more than AUD $20,000 in outstanding receivables.
  • Nearly half (47 per cent) of small business owners in Australia report it takes one week or more to prepare for payroll.

“It’s a huge red flag that so many small business owners in Australia are turning down opportunities and missing out on additional revenue as a consequence of issues with their cash flow,” said John Dunkerley, Country Manager, Intuit Australia.

“Our research emphasises the importance of regularly reviewing and analysing cash flow. Day-to-day operational demands can make finding the time to do this difficult, but without money being transferred into your business you will find it hard to grow, or even operate effectively.”

“It’s disappointing that many businesses are not taking advantage of affordable, easy to use online financial management tools, especially given most Australians are very savvy with their personal use of technology. Business owners can increase their efficiencies across a range of business tasks, such as preparing their bank and credit accounts, providing statements and organising their superannuation and, being STP compliant.”

As cash flow remains one of the top concerns for small business owners, Intuit Australia will be holding a financial health session at its flagship event, QuickBooks Connect®, in Melbourne on the 30thand 31stof May.

Kane Munro CPA, Director at Accountancy Online, who will be delivering a session in the financial health stream at this year’s QuickBooks Connect Conference said, “It’s understandable that small business owners are losing sleep over cash flow: it’s a make or break issue. My advice to smallbusiness owners who are having trouble is to simplify and automate their accounting processes. Cloud accounting solutions can be used to generate instant reports to make predictions for future cash flow, allowing businesses to more easily prepare and adapt.”

A separate survey2of more than 500 Australian small businesses conducted by Intuit Australia in March 2019 revealed that only 44 per cent of small business owners are currently using payroll software.

About the research

1Wakefield Research (www.wakefieldresearch.com) conducted the Intuit study by surveying 500 Small Business Owners in Australia with 0-100 employees between October 5 and October 19, 2018, using an email invitation and an online survey.

$5.8 billion worth of lost opportunities for Australian small businesses calculated via the following:

  • Number of Australian business owners with 0-100 employees (“small businesses”) = 1,161,000 (Roy Morgan Single Source Database Jan 14 – Dec 18)
  • Half (50%) of Australian small businesses have lost A$10,000 or more by foregoing a project or sale specifically due to issues created by insufficient cash flow. (Wakefield Research)
  • 50% of Australian business owners with 0-100 employees = 580,500. If 580,500 businesses lost $10,000 = $5,805,000,000.

2The STP study was designed and conducted by YouGov Galaxy and undertaken online among a sample of small business owners between 11 March and 15 March, 2019. The sample comprises of more than 500 Australian small businesses. For the purposes of the study, micro businesses employ up to four people, and other small businesses are classified as employing between 5-19 people. Both micro businesses and small businesses were included in this study. The sample was distributed throughout Australia, including capital cities, regional and rural areas. Following the completion of interviewing, the data was weighted to reflect the latest Australia Bureau of Statistics business counts.

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