Our Scottish Pacific SME Growth Index is a twice-yearly snapshot of Australia’s small to medium sized business sectors showing cashflow issues that many businesses face today, below is the second of six key insights found in our March 2018 report:

Cash flow situation improving

“Cash is King” is the business mantra underlying the success of generations of SMEs, and the results from the latest SME Growth Index point to an improving cash position for Australia’s small business sector.

Compared to 12 months ago, two-thirds of SMEs say their cash flow is now better, with just over one in 10 indicating they are in a worse or significantly worse cash flow situation.

Of the SMEs surveyed, 26.8% reported their cash flow position was “significantly better” than 12 months ago. A further 42.1% reported their cash flow was “better”.

Of the remainder, 19.9% reported no change, 6.6% reported cash flow was “worse” and 4.5% reported the position was “significantly worse”.

When only growth SMEs are taken into account, 21.1% say their cash flow is significantly better than 12 months ago, 38.2% say better, 28.5% unchanged, 8.6% worse and 3.7% much worse.

Each round, the Index asks SMEs to identify the key drivers of and barriers to their business growth.

For growth SMEs, 61.7% name cash flow as a key barrier to their growth. When the whole SME market is taken into account, cash flow is a key barrier nominated by 41% of businesses.

It is notable that growth SMEs recognise the value of long-standing customer relationships, with Index results ranking “anchor/core customers” as the most important driver for business expansion, ahead of “great people /staff/strong team” and the very pragmatic admission of “luck/good fortune/good timing”.

While cash flow is only one factor in the profitable operation of a business, it is a fundamental aspect of building a sustainable enterprise.

For the SMEs who are undergoing difficult cash flow conditions, there are a number of options available to improve their position.

However, the survey indicates that many businesses which are seeking to improve their cash position are not taking advantage of the alternatives that are on offer to traditional bank financing.

Overall, the high number of SMEs reporting better cash flow should act as a major driver of new capital expenditure and business investment demand within the Australian economy.

Like to know more? To download the latest copy of our SME Growth Index, click here.

Our next release will be available in September 2018 and will be available on our website.