65% of small business owners take pay cut as cashflow crisis grows

Small business operators are being pushed to the brink by cashflow problems, with a staggering 86% of small business owners and managers saying stress about cashflow is affecting their personal or home life.

Small business operators are being pushed to the brink by cashflow problems, with a staggering 86% of small business owners and managers saying stress about cashflow is affecting their personal or home life.

The National Australia Bank’s SME study on cashflow also reveals that 65% of small business owners and 48% of small business operators have taken a pay cut in a bid to ease their cashflow concerns.

Those who own or manage a business with a turnover of less than $200,000 are more likely to have taken a pay cut to ease cashflow troubles than those who own or manage a business with turnover between $200,000 and $1 million (53%) or over $1 million (43%).

According to the survey, the most common causes of cashflow stress include:

• Being hit with unexpected bills or expense claims (82% find this stressful).
• Sorting out taxes at the end of the year (77% find this stressful).
• Chasing payment for late or non-paying customers (71% find this stressful).
• Missing invoice, credit card or loan payment due dates (67% find this stressful).
• Receiving reminders from suppliers for unpaid bills (58% find this stressful).

Cashflow problems aren’t just affecting owners’ home and personal lives, with a third of respondents reporting that cashflow problems in their business have put stress on relationships with their customers or suppliers. Around 15% say they have lost clients as a result of cashflow problems.

Japp Jonkman, general manager of NAB’s business banking division in NSW, says SMEs who are feeling stressed about cashflow issues should seek support and assistance.

“SMEs do not have the safety buffer enjoyed by many large organisations during tight economic times. The key trigger points for stress this study has identified include unexpected bills, sorting taxes, chasing payments and receiving reminders. While these in themselves are not surprising, it is the cumulative toll these take that indicates SMEs are doing it tough and not seeking help.”

But the survey revealed just 22% of owners or managers have help managing their cashflow, either from internal sources (such as a colleague or mentor) or external sources (such as an accountant or bank manager).

The survey also hints at some quick and relatively easy ways for SME owners and managers to ease cashflow stress by more rigourous application of management techniques such as discounts for early payment, credit checks and refusing credit to repeat-late payers.

For example, while 59% of businesses check the credentials of a new customer before extending credit, just 15% do so regularly.

Related stories:

• 10 tips to break the cash-flow drought
• How do I know if my business has real cash flow problems?