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53% of SMEs struggle to pay their own bills or suppliers if they’re paid late

American Express’ Working Capital Research1 explores the impact cash flow uncertainty has on the mental health and wellbeing of Australian small business owners2 (SBOs).

The report found that 49% of SBOs say managing cash flow is the most stressful part of running their business, with 31% losing sleep over the issue. 21% claim their physical wellbeing has been affected by cash flow tension and 22% report it has put a strain on or broke down personal relationships. What’s more, 17% of owners have considered ceasing operations due to cash flow challenges impacting their wellbeing.

The research examined the factors Australian SBOs say are contributing most significantly towards their stress levels. Alongside customers not paying on time, inflation and the rising costs of living, a lack of knowledge about how to best optimise their working capital strategy were amongst the reported stressors. This is despite 79% of owners stating that managing their businesses’ working capital cycle is an important part of running their business.

Key findings include:

  • 54% of small business owners say the stress caused by managing their business cash flow has increased since the start of the COVID-19 pandemic
  • 53% say that they rely on their customers to pay on time, otherwise they struggle to pay their own bills or suppliers
  • 28% say their business is still being affected by an emergency they experienced in the last 12 months
  • 49% use personal funds to pay for outgoing expenses
  • 35% agree that they don’t know where to start when it comes to managing their working capital cycle
  • 51% say having access to capital without interest for a longer period would help them pay off suppliers in time and give them more opportunity to invest in their business
  • 76% would use a business credit or charge card to help manage their small business cash flow

Jennifer Mekhaeil, Accountant and Founder of skincare company Go Bare, said “I’m an accountant by trade and still my working cash flow for Go Bare is a constant source of worry. Being in the midst of an international expansion, the stress has definitely flowed into my everyday life, prompting me to lose sleep and negatively impact my mental health. For me, negotiating different payment cycles with my various suppliers and necessary business services has been instrumental in maintaining my available working capital.”

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With SBOs admitting they don’t have the knowledge they need to best optimise their working capital strategy, many are looking to the government and financial service providers for more support.

Alexi Boyd, CEO of the Council of Small Business Organisations Australia (COSBOA) said: “Small business owners are some of the most resilient people in Australia, but economic headwinds have created an environment where they are exhausted, mentally and financially. One of the most underutilised and least understood aspects of running a resilient business is managing working capital. This latest research makes one thing clear: small business owners are acutely aware of the challenges they face and are calling out for support to take back control of their business today and into the future. There is such an important role for the wider business community and government to play in providing small businesses with the tools they need to excel.”

Despite the significant mental health toll that working capital – or a lack thereof – is having on Australian SBOs, 72% remain optimistic about their business’s future. In fact, 23% agree that if they had access to more working capital, they would invest in themselves and their family.

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