What stops a quarter of all SME’s hiring more staff?
While Australia’s State and Federal governments are encouraging businesses to employ more staff, the real hindrance to creating more jobs could be much closer to home.
A new report from The Invoice Market shows almost a quarter of businesses — 23.2 per cent to be precise — say outstanding invoices are affecting their capacity to employ more staff.
The Invoice Market surveyed 800 Australian SMEs with an annual gross revenue of less than $10 million (in a normal year) for their “SME Cash Flow Crisis Report”, which was released in January 2017.
The report found that, on average, each Australian small or medium-sized business is owed more than $38,000.
The industries saying cash flow problems were hindering their ability to hire more staff include some of Australia’s most important industries. In the construction industry, 35 per cent said cash flow had stopped them hiring more staff. In manufacturing and accounting it was 28 per cent, in hospitality and tourism it was 30 per cent, and in both mining and real estate it was 29 per cent.
Ripple effect of poor cash flow is enormous
“Small businesses are the engine room of the national economy, employing seven million Australian workers, or 70 per cent of the entire workforce,” the report said. “As such, they are the incubators of our national prosperity.”
“Australia’s unemployment rate currently stands at 5.6 per cent, with 714,000 people out of work,” the report’s authors state. “This report shows that 23 per cent of Australian businesses, or 464,000 companies, would employ more people if they could improve their cash flow position. Therefore, unemployment could be effectively eliminated in Australia, taking pressure off federal public spending and ushering in a new era of national productivity growth.”
Perhaps what is most alarming about the survey’s finding is that almost half of all SMEs said they had no strategies in place to protect themselves from late payments, which are contributing to this growing crisis.
Not being able to afford to hire more staff limits your ability to grow your business and to increase your productivity and your earning capacity. If it’s cash flow that’s holding you back, that could easily become a situation that spirals out of control.
It is vital that all small and medium-sized-business owners have a system in place to stay on top of their cash flow and to ensure their debtors are paying their invoices on time. When you have your cash flow sorted, not only does it greatly reduce unnecessary stress, it also allows you to employ more staff and grow your business.
Perhaps it’s time to try Reep. With live access to your financial data, Reep is software that creates cash flow forecasts updated in real time — so you’ll always have a clear picture of your cash flow.