Sydney, 4 October 2011 - Global
debtor finance specialist Bibby Financial Services supports calls
for tax breaks for Australia’s small businesses, saying its recent research revealed that many in the
sector are facing increased pressure on profits and on their survival.
Bibby’s Managing Director Greg Charlwood said small businesses deserved special consideration
at the federal government’s Tax Forum held today and tomorrow, to examine how business tax
reform can increase productivity. "On almost all measures, small businesses have greater pressures now than a year ago. Our Bibby Barometer survey of small business proprietors showed they are under higher stress and have a more uncertain cash flow than a year ago. They face longer delays being paid and are coping with more difficult market conditions, staffing issues and access to finance.
"Bibby’s survey and recent insolvency trends indicate the extent to which these pressures threaten Australia’s business productivity," Mr Charlwood said.
The Bibby Barometer survey1 found one in five small businesses would become insolvent if they lost their two largest customers or if their two largest suppliers put them on cash-on-delivery status. A further 43 per cent would be forced to downsize if suffered either of these two events. The survey revealed only 27 per cent were confident that they could take in their stride the tightening cash flow that resulted from one of these events.
According to insolvency statistics released by the Australian Securities & Investments Commission (ASIC)2 early this month, companies entering into external administration across Australia reached the highest level in the June 2011 quarter since December 2008. The ASIC figures showed 2,656 companies in Australia entered external administration in the June 2011 quarter compared to 2,275 in the March 2011 quarter. New South Wales has consistently had the highest number of companies going into external administration over the past ten years, followed by Victoria and Queensland.
Commenting on the statistics, Greg Charlwood said small businesses deserved special consideration in any proposed government changes affecting business. "A major concern is the high sensitivity small businesses have to bad debts. Almost a quarter of the business owners we surveyed had experienced a bad debt in the past 12 months," Mr Charlwood said.
To alleviate cash flow problems many small business decision makers have needed to access personal savings (46 per cent) or else take out an overdraft (38 per cent). The majority of small businesses (62 per cent) feel that their bank requires too much security for their borrowings or overdrafts, while 22 per cent feel that the banks’ requirements are excessive. Funding will continue to be an issue for small business proprietors over the next 12 months, with 21 per cent intending to seek new funding for growth, and 19 per cent looking for funding to provide working capital. While 34 per cent will be looking to pay down an existing loan, 20 per cent intend to refinance existing debt, the Bibby survey found.
1 The Bibby Barometer was conducted with over 200 companies in June 2011 (excluding retail businesses). Small businesses were classified as those between 5 and 19 employees
2 ASIC Insolvency statistics – Companies entering EXAD-Region summary, ANNUAL, QUARTERLY released on Friday 2 September 2011
Posted on 04 October 2011