Factoring and SMEs

Decline in confidence creates cashflow crisis for SMEs

Small to medium enterprises (SMEs) are warned to keep a watch on their cashflow with business confidence reaching a low not seen since August 2002 (May 2006, Sensis Business Index).

According to Bibby Financial Services, Managing Director, Greg Charlwood, the sharp decline in confidence during the last quarter coupled with a forecast of an interest rate hike could mean tougher times for businesses in the second half of the year.

“A decrease in business demand coupled with rising fuel prices have left operators pessimistic,” Mr Charlwood said.

“We are now seeing businesses push back their payment date for trade invoices from 30 to 60 days, and for many SMEs this is creating huge cashflow issues.

“What’s more, many economists are predicting the Reserve Bank of Australia (RBA) will raise interest rates, especially now America has,” Mr Charlwood said.

One way Mr Charlwood says business can gain access to the funds they need without having to mortgage their home or take on a bank draft is to use the services of a factor and discounter.

“The beauty of factoring and discounting is that it allows businesses to convert up to 90 per cent of their unpaid invoices into instant cash within 24 hours, enabling businesses to get a continual injection of cash to float their business,” Mr Charlwood explains.

In Australia factoring and discounting is fast growing as the preferred means of finance among SMEs.
Research recently released from the Institute of Factors and Discounters (IFD) put the total turnover for factoring and discounting for the year ending March at $39.4 billion, 21 per cent above the previous year.

Additionally the IFD recorded an increase of more than $2 billion in the March quarter from last year, which in percentage terms is a growth of some 27 per cent.

What’s more they uncovered that 4665 businesses in Australia are now using debtor finance.

Mr Charlwood notes that the consistent growth within the industry is sending a clear message that more and more businesses are seeing not just the benefits, but the absolute need for a steady cashflow.

Blockbuster Budget, says CPA Australia

The tax cuts and superannuation proposal announced as part of the Federal Budget tonight represent a major beneficial shake up of our income tax and super systems, said CPA Australia.

Australian Trade Payments Continue to Worsen

There has been a continued decline in business to business trade payments this year, signalling greater cash flow and credit risks for business, with small business the most likely to feel the impact.

Figures, released by Dun & Bradstreet (D&B) (ATPA), show trade payments remain almost double standard trading terms.

GST ruling impacts on SME’s cash flow

The Australian Taxation Office’s (ATO) new ruling on GST will see firms forced to pay the full GST on a sale price, even when then have received as little as 11 percent of the price as a deposit.

For many SME’s this new ruling will greatly affect their cash flow.

Businesses most likely to be affected are printers, builders, on-sellers of capital equipment and building materials and manufacturers taking deposits. Ok to post once the change is made.

For more information see the ATO website.

Industrial relations reform and a united workplace

The Federal Government is cranking up the volume on proposed changes to the “rules of engagement” between business owners and employees.

Anecdotal evidence suggests that many SME owners have allowed the debate to wash over them or are at least uncertain as to how the proposed changes will affect their workplace.

Although difficult to keep fully abreast of the opposing views coming from employer groups and the unions, business owners should be concerned about issues which are of particular importance to their own employees.

Pro-activity on the part of employers to keep staff members informed of relevant aspects of the reform will go a long way to maintaining harmony in the workplace.

Not just your average accountant...

Passion, aggression, excitement – these are not words usually associated with accountants, but the latest squabble within the profession has created some emotional debate between the two main industry bodies, the Chartered Accountants (CAs) and the Certified Practising Accountants (CPAs).

Each body is having a turf war over whose brand should dominate the accounting industry. What significance does this have for the SME market?

We suspect that most SME owners have little interest in the difference between a CA or a CPA. Business owners already have a generally favourable opinion of the generic brand name of accountant. By choosing to bring what should be an internal debate into the public arena, the profession is only creating a mist of confusion and uncertainty over the goodwill which the accountant brand has enjoyed for decades.

The CAs and CPAs have almost merged several times in the past but have never quite made it to the altar. With many accountants already holding membership to both industry bodies it does seem strange (and unnecessary) that the profession has decided to go public with its ideological musings and put at risk the good image of accountants everywhere.

Perhaps the wedding plans for the profession should be quickly moved forward!

Warning on award system penalties

HUNDREDS of thousands of small businesses that employ workers on individual agreements, or on the basis of a handshake deal, are playing industrial relations Russian roulette.