Owners of small to medium enterprises (SME) need to focus as much on cash flow as they do on profit and loss statements to survive the current market climate, National Australia Bank (NAB) national manager of financial planner banking Malcolm Arnold has said.
Speaking at the Association of Financial Advisers (AFA) GenXt Roadshow in Sydney yesterday, Arnold said healthy profits could often mask cash-flow problems.
“Few businesses have been immune, with almost all financial planning practices across the country feeling the pinch of tighter cash flows given the need to continue to pay staff wages, rent and other fixed costs, while incoming cash has continued to fall,” he said.
In an SME cash-flow survey commissioned by NAB in September last year, 93 per cent of respondents said they were experiencing some form of cash-flow stress; 58 per cent had taken a pay cut due to issues with cash flow; and 36 per cent said problems with cash flow had put stress on customer and supplier relationships, Arnold told delegates.
Surprisingly, only 21 per cent of business owners had a business plan in place, however, those that did were weathering the financial storm a lot better, he said.
“Business information needs to be accurate and up to date, and business owners who are experiencing cash-flow problems should seek advice from their licensee or bank as soon as possible, as well as engage external support from industry specialists,” he said.
Some things business owners can look at to address cash-flow issues include realigning the service offering to clients; reviewing staff-to-client ratios; investing in training to diversify team skills; outsourcing; selling client books; bringing forward succession plans; and re-forecasting strategies such as potential acquisitions, he said.
