Aussie companies losing A$5.8 billion of opportunities due to bad cash flow

The cost of Australian businesses missing out on opportunities because of poor cash flow comes up to A$5.8 billion every year.

This is according to a study by Wakefield Research and Intuit Australia, which involved 500 SME owners and was carried out in October last year. At least half of the owners surveyed have lost at least A$10,000 by giving up a project or sale because of cash flow issues and this adds up to a total opportunity cost of A$5.8 billion each year.

Almost half of surveyed businesses reported that it took more than a week to prepare for payroll, which made existing cash flow and time management issues even worse. And in instances where a business had been at risk of not being able to pay employees on time, 35% of them resorted to paying their employees late.

John Dunkerley, country manager for Intuit Australia, told Finder that the cash flow situation facing local businesses was alarming. "It's a huge red flag that so many small business owners in Australia are turning down opportunities and missing out on additional revenue as a consequence of issues with their cash flow," he said.

On the overall, 63% of Australian SMEs had experienced cash flow difficulties more than once in the last year, with 31% estimating that their business currently had over A$20,000 in outstanding receivables.

The problem is made worse by the unwillingness of big companies to be transparent in their payments to smaller suppliers.

A recent report by The Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, found that some large corporations are reluctant to reveal the timeframes in which they pay their small business suppliers.

The report found that even businesses who are paying in 30 days and have signed the BCA (Business Council of Australia) supplier code are unwilling to actually report on how often they have delivered on their promises.