SMEs looking for growth indicators in 2014: New Bibby Barometer Survey results

SMEs looking for growth indicators: 2014

Sydney, April 8, 2014 – Seven in ten Australian small and medium-sized enterprises (SMEs) are confident or very confident about their overall prospects in the coming 12 months, although cash flow challenges are expected in the year ahead causing SMEs to be cautiously confident in outlook according to the latest SME survey from leading small business finance specialist Bibby Financial Services and research firm CoreData.

New research from Bibby and CoreData reveals that financial and insurance services SMEs are the most confident about their business prospects (85%), followed by those from administration and support services (80%) and education and training (79%). 

However, while SME confidence is high, almost one in three SMEs report finding cash flow more difficult to manage than 12 months ago and almost half believe there has been no change to their cash flow situation. Cash flow issues experienced in the past 12 months include one in four SMEs (28.9%) report customers making excuses for slow payments, 21% report declining margins and 15.8% have had issues with Government ‘red tape’, compliance and tax administration. 

Triggers directly from customers that have negatively impacted SME cash flow in the past 12 months include 27% have suffered late payments from a client, 15.3% have had a bad debt because a customer has gone bust and 12.6% have had a client negotiate to pay an invoice in monthly instalments. 

Mark Cleaver, Managing Director, Australia and New Zealand, said: “Problems like these are forcing some SMEs into less productive activities, like having to spend more time chasing payments (17%). We also found that some SMEs (11%) are offering discounts for early payment and 15% of SMEs are even refusing to trade with some clients due to non payment.” 

The research from Bibby Financial Services and CoreData, conducted from February 3-14 on 859 SMEs across Australia, reveals that Australian SMEs hold a largely neutral position in relation to cash flow. The Bibby SME Cash Flow Index Score of +1.02 highlights that cash flow has marginally improved from July 2013, though it has sustained a recovery from a low in August 2012.  

Andrew Inwood, founder and principal of CoreData, said, “Despite high levels of business confidence, almost half the respondents (49%) think the Australian economy will stagnate this year. One in three (33%) expect the domestic economy will contract, while just 18% think it will expand. South Australians (37.5%) are the most likely to more concerned about the global economy than they were twelve months ago. 

“If you break it down by state, Victoria are most positive about their own businesses with 73% saying they are somewhat or very confident. They are closely followed by NSW (70%), South Australia (69%), Queensland (66%) and Western Australia (64%). 

“Businesses don’t expect a huge shot of growth from the Australian economy this year, most expect the economy to just chug along which is why perhaps only 25% of SMEs plan to invest more to grow their businesses in the next 12 months,” Mr Inwood said. 

According to the research almost one in four SMEs don’t believe they are getting enough support from their bank. Key issues include bad service from their local bank (40%), a lack of understanding from the bank about their business (34%) and 30% believe bank loan rates are too high. Almost 30% also believe the bank requires too much collateral and security. 

The research shows that 35% of SMEs will consider a non-bank option for additional funding. 

Mr Cleaver commented, “When seeking credit, the most attractive features SMEs look for include not having to risk personal property (65%), access to decision makers directly (60%) and fast credit decisions (60%). Reliable cash flow to support business growth is also very attractive for SMEs (58%). All factors are provided through a debtor finance facility which is why it is a growing form of funding in Australia.” 

“Debtor finance allows SMEs to quickly convert unpaid invoices into cash and businesses don’t have to rely on the family home or other property as collateral. Instead, they can leverage their accounts’ receivables, which is typically one of the largest assets on a business’s balance sheet. Australia’s debtor finance industry has grown by almost 10% over the past three years,” Mr Cleaver said.

*Please click here to view Bibby Financial Services – SME Barometer infographic