Experts Warn of Rising Cash Flow Crisis for SMEs

As Australia's small- and medium-sized enterprises (SMEs) grapple with rising operational costs, cash flow remains their most pressing issue. NAB’s latest economic data reveals that 40% of SME owners consider cash flow their top concern, surpassing other challenges like profitability, access to capital, and workforce management.

The Strain of Rising Costs

The post-pandemic business environment, global economic pressures, and inflation have stretched SMEs thin. NAB business executive Krissie Jones emphasized that while small business owners are known for their resilience, the rising cost of doing business and regulatory hurdles have compounded their struggles.

“Small business owners are incredibly resilient,” said Jones. “But they’re already stretched and facing challenges that are keeping them up at night. Reducing red tape and providing targeted support can make a meaningful difference.”

Challenges in Workforce Management

Many SME owners are finding it challenging to attract and retain skilled workers. Colin and Charmagne Moore, owners of a pool and spa business in Tamworth, highlighted their efforts to expand their team but struggled to find reliable and skilled staff.

“Post-COVID, there’s so much work available in our area,” Colin explained. “If someone is reliable and has good organizational skills, they get snapped up quickly.”

Charmagne added, “Losing trained staff to competitors is a financial hit. More focused policies on skilling people and directing the unemployed to industries that need them most would be invaluable.”

Encouraging Signs Amid Challenges

Despite ongoing difficulties, some positive trends have emerged. According to NAB's merchant terminal data, Black Friday and Cyber Monday in 2024 brought a 23% increase in spending compared to an average weekend. Retail, hospitality, and cosmetics businesses reported significant sales boosts, showing that consumer confidence can lead to profitable opportunities.

Recent tax cuts and reduced fuel prices have also provided some relief, helping to offset rising costs and restore optimism among business owners.

Approaches of finance  strategies in business

Due to the recent trends in the economy, being a strategic planner and a business major with a degree in finance has become essential for SMEs. Managing cash flow entails a multifaceted approach, including timely billing and invoicing, negotiating good payment terms with vendors and suppliers, and keeping cash reserves to tide over difficult periods.

Technological solutions must also be tapped into as the explored business people spend a lot of time and money. For example, accounting software and cash flow forecasting tools can help SMEs optimally manage their finances.

Cash flow concerns require practical solutions and support. Small business owners are encouraged to assess operational efficiencies, explore funding options, and focus on retaining talent to remain competitive in an evolving economic environment.

Contact OM Financial Services Additionally, focusing on operational efficiencies, exploring funding options, and retaining top talent are key to navigating challenges and positioning small businesses for long-term success.

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