Small firm, huge debt

AUSTRALIA'S small businesses are carrying $10.4 billion in debt, of which 62 per cent is overdue, new research by the Commonwealth Bank shows.

The average business is owed $18,624, an amount that sets up a domino-effect as payments are withheld from successive businesses, the bank says.

The findings, based on a survey of 761 small businesses turning over less than $2 million, show that about 57 per cent agree late payments are "standard practice'' and 29 per cent withdhhold payments to preserve their own cash holdings.

CBA's general manager of local business banking, Adam Bennett, says cash flow remains a critical challenge for Australian small businesses.

"Business owners do a very good job (of managing finances) but there is a proportion of businesses where it is not a core skill and they are therefore more likely to find themselves in a difficult position,'' he says.

"We are encouraging them to think about looking for support early, whether that is from their business coach, their bank or somewhere else.

"Business owners should forecast their cash flow to identify weak spots and develop solutions,'' he says.

The survey also highlights the best and the worst states for small business debt.

Businesses in New South Wales are estimated to be owed $4.4 billion, with 78 per cent of that debt overdue. The best performer is Western Australia, with only 22 per cent of its $236 million debt overdue.

But the survey doesn't back a proposition that mining is the answer. Nearly 66 per cent of the $1.9 billion owed to businesses in the star-performing state of Queensland is overdue, compared to 54 per cent of South Australia's $448 million debt.

Mr Bennett says the survey did not reveal an explanation for the divide between states.

"But this doesn't just impact their business,'' he says. "When they are paying late it creates a domino effect so they are more likely to pay their own suppliers late.''

The research mirrors a recent report from Dun & Bradstreet, which shows 62 per cent of business accounts were settled late in the December quarter an average of 52.3 days late.

While this is an improvement on the post-global financial crisis high of 56 days, it underscores the lack of cash payments in the small business space.

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Scrap the carbon tax: small business

Small businesses want an end to red tape and also want the carbon tax to be scrapped. Source: Supplied

Overworked: Australians work some of the longest hours in the developed world. Source: Supplied

SMALL business firms are demanding urgent relief from bureaucratic red tape and the scrapping of the "deeply unpopular" carbon tax, a national survey of 1,005 companies has found.

As the Gillard Government appointed its fifth Small Business Minister in less than two years, more than 50 per cent of firms expressed disappointment with the level of government support for the "engine room" of the economy.

Cutting the amount of GST paperwork - and scrapping the carbon tax - remain high priorities for small business, according to the annual MYOB survey.

They are also demanding greater investment in transport infrastructure around the cities and a reduction in payroll tax.

While the carbon tax is more popular with voters than it was before its July 2012 introduction, 63 per cent of those surveyed see its abolition as a high priority.

Tim Reed, the CEO of MYOB, said the high level of unrest reflected business concerns over the direction of the Labor Government.

"It's more a signal of overall confidence in this Government to make good macro policies," Mr Reed said.

"The Government has lost the political battle on carbon tax in the minds of business."

The percentage of small businesses who want the carbon tax scrapped - 63 per cent - is higher than it has ever been, according to MYOB.

This follows a News Limited article last week that reported insolvency professionals and business executives claim the carbon tax is contributing to a record number of businesses going into administration. This is based on Australian Securities and Investments Commission data - comparing voluntary administrations for the 12 months to December 31 2012, compared to 2011.

"Small businesses know they are paying the price of the Government's carbon tax," the Opposition's climate change spokesman, Greg Hunt, said.

"It is no surprise this issue is near the top of the list of concerns for small businesses as their increase in power bills has been proportionally much higher, and they have limited ability to pass on the cost."

A spokesman for Climate Change Minister, Greg Combet, said: "The Gillard Government has provided small business with tax relief and assistance in making improvements to energy efficiency."

"We increased the small business instant asset write off to $6,500, funded by carbon price revenue.

"The Government has also established the Energy Efficiency Information Grants program which provides grants to industry associations to deliver practical, tailored energy efficiency information to small and medium enterprises so they can make savings on their energy costs."

 

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Small businesses more upbeat

MORE small business owners are upbeat about the economic outlook, but they say rising fuel costs are the biggest constraint for doing business.

Software provider MYOB's 2013 business monitor found fuel prices remain the biggest pressure point for small and medium sized enterprises (SMEs), followed by attracting new customers.

But cash flow is becoming less of a problem.

"Interest rates are also less of a concern," MYOB chief executive Tim Reed said.

The Reserve Bank of Australia (RBA) will hold its monthly board meeting today and is widely expected to keep the cash rate at three per cent, its lowest level since the 2008-2009 global financial crisis.

The monitor's study of 1005 business owners an managers found over a quarter (26 per cent) of SMEs were expecting the economy to improve within 12 months, up from 19 per cent in its July 1012 report.

"It indicates hope is springing back for Australia's business coalface," Mr Reed said.

The proportion expecting an economic improvement to take one to two years is now 37 per cent, down from 42 per cent previously, while 22 per cent think it will take more than two years, down from 24 per cent.

Almost a third (30 per cent) of SMEs expect their revenue to rise this year, while 42 per cent are expecting revenue to be stable.

Mr Reed said the combined 72 per cent of SMEs expecting increased or stable revenue was encouraging when compared with only 58 per cent last year.

Looking back over the past year, 40 per cent reported steady revenue, only just above the 39 per cent who saw a decline, while 18 per cent reported increased revenue.

Operators in the manufacturing and wholesale industry were hit hardest, with 52 per cent experiencing a revenue fall, while 29 per cent of finance and insurance businesses recorded a rise.

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