Is your small business feeling the effects of inflation and the rising cost of living?
Xero has released a recent survey report titled Money Matters: navigating the impact of economic conditions on the cash flow of Australian small and medium-sized businesses. The report, conducted across seven countries including Australia, intends to understand the impact of the current economic climate on small and medium-sized businesses’ cash flow.
The research found that Australian businesses are feeling the effects of cash flow struggles, with many small business owners having to increase their prices just to make ends meet. Some have even reported that they are having to dip into their personal savings to cover rising business costs.
Findings
Here’s a breakdown of the survey findings for Australian business owners:
- More than 60% of businesses that took part in the survey have experienced some kind of cash flow issues in the last 3 months.
- 14% are currently undergoing significant cash flow challenges in their business.
- More than a quarter of business owners have had to dip into their own personal savings to keep their businesses operating.
- 1 in 3 Australian business owners have been unable to pay themselves at some point over the last quarter.
- Nearly half of surveyed business owners are concerned about the financial future of their business.
- 45% of business owners are worried about the future of their personal finances.
- Less than half reported feeling confident that their businesses were financially secure and on track to achieve their financial goals.
- 60% of business owners surveyed stated that inflation and rising costs had directly impacted their cash flow management over the recent months.
Causes
These findings demonstrate significant financial stress on businesses as a result of the current economic climate, and it’s no secret that rising costs of living and business operations are a leading cause.
Over a quarter of business owners surveyed by Xero reported that they have struggled to pay their creditors on time at some point in the last 3 months. On the flip side, 40% of business owners have experienced late payments and stalled revenue from debtors. ate payments, impacting the entire supply chain and creating a domino effect for other businesses.
Nearly all participants that were involved in the research report listed inflation as a key problem responsible for small business cash flow struggles.
Effects
Not only have cash flow struggles impacted businesses financially, but Xero found that the health of small business owners has been majorly effected as well.
Of those surveyed:
- Nearly 60% reported an increase in stress levels
- 50% have experienced anxiety
- 48% have reported trouble sleeping over the last 12 months, due to the stress.
Xero’s report actually discovered that the overall wellbeing of Australian small business owners was below that of the general population. In fact, Australia came in as having second-lowest wellbeing of the seven countries involved in the report.
It’s safe to say that cash flow is proving a major challenge for many small businesses. Xero’s research has revealed some troubling signs about how small business owners are dealing with the uncertainty and volatility of Australia’s economic climate.
The sacrifices that business owners are making to keep their businesses going and employees paid are proving to be not just financial, but physical, mental and emotion as well.
Solution
In the current economic climate, it’s more important than ever that businesses are staying on top of their business strategy, management and structure. Times change, so running a business that is equipped to adapt and evolve with these changes is the key to weathering the economic storm.
If your business is struggling to keep up, try:
- Consistently and thoroughly monitoring cash flow
- Utilising planning, forecasting & cash flow management tools such as Xero
- If possible, offering customers flexible payment options
- Reviewing and improving operations process where possible
- Consider automating business processes
- Identifying unnecessary expenses and overdue debtors
And if it’s all seeming like too much, contact the professionals! If the thought of looking at your cash flow does not spark joy, or you’re too busy just making ends meet, it pays to have a set of knowledgeable and experienced eyes to identify problems, and develop solutions.
Whether you struggle with cash flow management, budgeting, invoicing, correct margins or staying on top debtors and creditors, we are here to help.
At BIS Cosgrove, we understand that running your business isn’t just a job, it’s a lifestyle. Inflation impacts more than just your financial health, but physical, mental and emotional too. We take a whole-of-life approach to accounting, business management and financial planning, to help you create a life that meets ALL of your needs, not just one that pays the bills.
With the help of Xero’s industry-leading software, and our team of highly experienced accountants and advisors, we can help you develop a business that is resilient enough to withstand the ebbs and flows of the volatile Australian economy.
Don’t fear the thought of cash flow management, get in touch with one of our expert accountants or advisors and find out how we can help you ensure your business not just survives, but thrives for years to come.
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The material and contents provided in this publication are general and informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
