Cash Flow – The No. 1 Problem Faced by SMEs (Sensis, March 2010)

 In Daily Column

Most SME's believe banks are their only savior to cash flow woes...
Most SME’s believe banks are their only saviour to cash flow woes…

According to the latest Sensis Business Index Report (March 2010), SMEs have ‘mixed feelings’ about their business prospects over the coming 12 months and cite cash flow problems as their number one concern.

Hardly surprising.

Whilst the government touts its super tax on mining and banks strategize about how to spend their $3 billion in quarterly profits, small business – the true spearhead of economic recovery –is struggling to find its way.

Lack of work and sales run a close second to cash flow problems in the report. Tax, somewhat (but not altogether surprisingly), is well down the list.

In proportion to the level of concern, there’s not much written about cash flow. News articles and blogs love to hit SMEs with the latest marketing tips from supposed small business ‘gurus’. Interestingly, marketing/business advice scored….wait for it….(drum roll)… 0% in the survey!

It should be noted that large financial institutions advertise very heavily in mainstream media, so it is unlikely that journalists and bloggers are going to ‘rock the boat’ by writing articles about cash flow that are contrary to the interests of their advertisers.

For the most part, SMEs in Australia still believe that banks are the only organizations that are capable of resolving their cash flow problems. In the UK, Europe and the US, SMEs are better informed, and use a combination of banks, debtor and trade financiers. Ostensibly, they take their issue to the provider most capable of delivering a cost-effective and expedient solution.

If you’re looking to increase sales, have low cash reserves, don’t want to borrow against your assets, and have solid customers, you can borrow against your accounts receivables to start new jobs. Put simply, 80% of the amount to be invoiced can be placed in your bank account within 24 hours.

This means no more waiting around to get paid (as you well know this can sometimes take 120 days+) to start a new job.

So, who can use this type of financing?

Any SME that has customers with reliable credit histories.

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