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$76 billion small business cash flow crisis

Cash flow is the number one issue affecting small to medium businesses right across Australia. According to The Invoice Market’s research that’s $76 billion worth of outstanding invoices and two million businesses drowning in a sea of unpaid bills.

If this issue was fixed, close to half a million jobs could be produced, reducing Australia’s unemployment rate to almost zero.

The Invoice Market’s SME Cash Flow Crisis Report illustrates that Australian businesses are constantly owed an average $38,000 each, with corporate customer excuses ranging from ‘lost in the system’ and ‘in dispute’ to ‘being reviewed internally’ and ‘being processed offshore’.

The average small business is owed a massive $38,000

Cash flow is so detrimental that more than a third of Australian businesses have to cash in their own personal savings to deal with their business cash flow, which severely impacts their ability to pay for their living expenses. This results in creating a hindrance to employ new staff, and makes it difficult to pay current workers.

According to The Invoice Market CEO, Angus Sedgwick, the findings had significant ramifications for Australians. Small businesses are the “engine room of the national economy“. “Almost half a million small and medium sized businesses say they would employ more people if they could improve their cash flow position, reducing Australia’s 715,000 unemployment queue to 200,000 people or fewer”, Mr Sedgwick said.

A third of businesses have to cash in their personal savings to boost business cash flow

According to the Australian Bureau of Statistics, half of all small to medium businesses go out of business in the first three years of operation. The Australian Securities and Investment Commission states that poor cash flow is cited as a factor in 40% of business failures.

Of the most shocking findings in this report is that even though late payments cost businesses money, it is the hidden costs that is the most revealing. Forty-six per cent of businesses have to ask twice or three times for their bills to be paid by erratic corporate customers.

Mr Sedgwick said that small businesses were actually the slowest in paying their bills to other small to medium businesses. “While Australians are renowned for their laid-back attitude, some businesses are having to ask for payment up to five times over several months, indicating that a new culture of ‘corporate selfishness’ has developed across Australia,” he said.

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