07/10/2016 8:15 AM AEDT | Updated 07/10/2016 8:15 AM AEDT

Small Business Owners Working Longer As Confidence Takes A Hit

And cash flow concerns are keeping them awake at night.

Cash flow concerns are keeping small business owners awake at night.

Australian small business owners are working up to 80 hours a week and are losing sleep over issues surrounding cash flow and not having enough time, research has revealed.

The Scottish Pacific SME Growth Index survey of 1200 SME owners from across Australia also showed that one in four SME owners predicted revenue to decline through to the end of 2016.

The working capital finance provider commissioned independent firm East & Partners to conduct the research with Scottish Pacific CEO Peter Langham saying the latest results showed SME confidence had taken a firm hit.

"Over the past two years, SMEs predicting revenue decline have almost doubled (13.2 to 24.2 percent), while those predicting increases have halved their growth forecasts (8.6 to four percent)," Langham said.

For the first time since the six-monthly Index began in 2014, SMEs forecasting positive growth (48.4 percent) are outnumbered by those forecasting negative growth or no change (51.6 percent).

"The current environment is clearly placing pressure on Australia's small to medium business community," Langham said.

Scottish Pacific
Scottish Pacific CEO Peter Langham says SMEs nominated cash flow as the most stressful element of business in a recent survey.

SMEs putting in the long hours

The survey showed a 50+ hour week is standard for most SME owners (88.8 percent).

Almost half of SME owners and senior managers (43.7 percent) are spending 60 to 80 hours a week working on their business, which equates to 12+ hour days, six days a week.

The Index showed the main issues keeping small and medium business owners awake at night are cash flow (72.5 percent) and not having enough time to get things done (55.2 percent), customer or supplier issues (39 percent), business model disruption (17.3 percent) and staff issues (13.3 percent).

And those cash flow fears appear to be justified with recent ASIC figures showing the top three reasons for insolvency of small to medium businesses to June 2015 were inadequate cash flow and/or high cash use (44 percent), poor strategic management (42 percent) and trading losses (34 percent).

Scottish Pacific

Non-traditional lenders help SMEs grow and scale

Langham said businesses are increasingly looking beyond the banks to fund growth and to help ease cash flow concerns.

"From this time last year, there has been a 30 percent increase in SME owners planning to fund their growth using a specialist non-bank lender, with one in five now indicating their intention to do so," he said.

And the non-traditional lenders marketplace is booming, with Australia following the trend set in the US where online lenders have grown 175 percent a year.

Tips to avoid a cashflow crisis

Optus recently launched Smart Shop, a marketplace of device apps that can help reducing time consuming tasks such as invoicing and managing expenses.

Here Smart Shop has partnered with online accounting agency Sage One to present 7 tips to help SMEs avoid a cash flow crisis.

  • Credit control: Basic procedures to put in place include setting clear credit limits and payment terms for your customers, sending out invoices promptly and firmly chasing all debts when due. Stop offering credit to bad payers.
  • Sales forecasting: As soon as you have a month's sales behind you, you can start forecasting cash flow - using your market knowledge, think about your pricing, the level of competition, the state of the economy and so on, to work out demand.
  • Cut unnecessary costs: Think lean and mean. Scrutinise every item you buy, know exactly where your cash is going and always get value for money.
  • Managing stock: Only ordering what you need is essential to avoid outlaying unnecessary cash.
  • Keep lenders on side: Always keep your books up to date so you can show your figures, just in case you need to borrow.
  • Spot warning signs: A drop in turnover, customers taking longer to pay and being forced to settle supplier invoices later than usual -- these are all classic signs that your cash flow is suffering. Don't ignore the warnings; it's generally easier to work out ways to increase working capital before you've built up a lot of debt.
  • Manage accounts on the go: Not all business owners manage their accounts in an office using a desktop. Ensure your accounts stay on track even when you're out of the office by getting easy access them online.