Operating obligations rank ahead of credit access as businesses protect working capital.
Tax and compliance costs have overtaken access to credit as the leading cash flow pressure facing Australian SMEs, according to the latest ScotPac SME Growth Index Report.
One in five SMEs (20%) nominated tax and compliance costs as their greatest cash flow pressure. Rising input and supply costs followed closely at 19%, while wage and payroll commitments were cited by 17% of SMEs.
Access to credit was identified by 12.5% of SMEs, with smaller SMEs (15%) more affected than larger SMEs (10%).
The narrow gap between the leading pressure points suggests SMEs are being squeezed on several fronts, rather than by a single dominant factor.
ScotPac CFO, David Kirwan said the findings highlighted the importance of planning for upcoming obligations as well as identifying suitable funding options.
“Tax, supplier and payroll costs can all place pressure on working capital, particularly when payments are due before customer invoices have been settled,” he said.
“SMEs should closely monitor customer payments, stock levels and supplier terms to understand how these costs may affect day-to-day operations.
“If a timing gap is emerging, exploring funding options early can give business owners and their brokers more time to find an appropriate solution.”
External risks add to cash flow pressures
In addition to anticipated costs, SMEs are also managing external risks outside of their control that have the potential to affect confidence, revenue and day-to-day resilience.
The chief external risks identified by SMEs include:
- Government economic policy or uncertainty (18%)
- Domestic or international recession (18%)
- Inflation driven elevated energy costs (13%)
- Supply chain disruption linked to geopolitical conflict (12%).
Responses were similar across all business sizes, suggesting these risks are being felt broadly across the SME sector.
SMEs plan practical supply-chain responses
Australian businesses that have suffered disruptions due to the Middle East conflict are taking matters into their own hands and planning ways to reduce its impact.
The SME Growth Index report reveals:
- 47% plan to secure more flexible supply-chain funding over the next 12 to 18 months.
- 31% plan to move closer to suppliers and customers.
- 23% will shorten and / or simplify their supply chains.
Mr Kirwan said these strategies highlighted the link between identifying external risks, adopting mitigation actions and managing working capital needs.
“Whether responding to day-to-day cash flow pressures or wider external risks, business owners should work with their advisers to update forecasts, identify potential funding gaps early and secure appropriate support,” he said.
“ScotPac offers the broadest range of working capital solutions for Australian SMEs. Our specialists work with businesses to tailor solutions that help preserve liquidity, strengthen supply-chain resilience and support future investment.”
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About ScotPac’s SME Growth Index Report
- Commencing in March 2014, ScotPac’s twice-yearly SME Growth Index Report is Australia’s longest-running research report on SME sentiment towards revenue growth prospects.
- The Round 25 research was conducted by East & Partners who interviewed 727 SME enterprises with annual revenues of A$1 million – $20 million.
- SMEs surveyed have operated continuously for an average of 16.6 years and manage, on average, 50 full-time equivalent employees.
About ScotPac
ScotPac is Australia and New Zealand’s largest non-bank SME business lender, providing funding to small, medium and large businesses from start-ups to corporates. For over 35 years, ScotPac has helped thousands of business owners succeed, offering fast and flexible funding. ScotPac is large enough to trust, small enough to care.
For more information contact: Todd Hayward – Mob: 0412 205 151
