Don’t solve a cash flow crisis with personal finances

Don’t solve a cash flow crisis with personal finances

Cash flow in Australian small- and medium-sized businesses is so dire that 38 per cent of owners are dipping into their personal savings to plug the gap.
That’s according to a new report from The Invoice Market, released in January 2017, which surveyed 800 SMEs with a normal annual gross revenue of less than $10 million.

The report found that, on average, Australian businesses are owed $38,000 by their customers at any given time, dramatically impacting cash flow and causing a great deal of pressure and stress for the business owners.

But it’s not just causing problems at the office. The report also found the cash flow situation many businesses found themselves in was also causing problems at home. Almost half of all SME business owners (44 per cent) surveyed said that unpaid invoices had caused significant pressure on their personal finances — affecting their ability to pay their non-business bills such as rent, mortgage, food, clothing, entertainment and other living expenses.

Don’t let unpaid invoices cause you stress and financial pain

It is no wonder that almost 47 per cent of all business owners said waiting to be paid for outstanding invoices increased their stress levels.

But perhaps the most alarming statistic in the report is that almost half of all SMEs had no strategies in place to protect themselves from late payments. This is like knowing you have a serious illness but not taking the medication you need to make you feel better: You cause yourself more worry and stress, it begins to affect all parts of your life, and — while you delay — you’re getting sicker and sicker.

Eventually, you hit breaking point and in illness, as in business, that can be fatal. A self-inflicted cash flow crisis like this is often cited to the Australian Bureau of Statistics as one of the key reasons half of all companies go out of business within their first three years of operation.

Don’t become a statistic! And don’t let your business cash flow problems cause problems at home — the very place many of us use to retreat from the stresses at work.

So, how do you do that? Have procedures in place to ensure you are always on top of your cash flow. Almost 40 per cent of customers are paying their bills two weeks to one month late — send out reminders early. Some 17 per cent of customers need reminding three times and 38 per cent need reminding at least once; you need to have a system in place to deal with every invoice before it becomes a problem.

Why not give Reep a try? With live access to your financial data, Reep is software that creates cash flow forecasts updated in real time — meaning you keep on top of your cash flow and never have to dip into your personal savings.

To help keep a close eye on your cash flow, try out the Reep free trial.