48% of small businesses concerned about financial future: Xero

The report found that 48 per cent of small-business owners were concerned about their business’s financial future, with 49 per cent indicating that they felt on track to achieve business goals, while 60 per cent didn’t feel confident about their ability to absorb financial shock.

Fourteen per cent of SMEs said they were experiencing "significant" cash flow challenges, with nearly a third (29 per cent) of small businesses checking their cash flow position daily.

There were further signs of financial stress among small businesses, with 27 per cent of respondents revealing they’ve needed to dip into personal savings to keep their businesses running.

In addition, the report found that 34 per cent of small-business owners were unable to pay themselves, 26 per cent found it difficult to pay bills on time, 42 per cent needed to negotiate payment terms with suppliers, and 40 per cent experienced stalled revenue.

Inflationary impacts were considered a major hurdle by small businesses, with 57 per cent of respondents revealing that it has impacted cash flow management over the past six months.

Speaking of the findings, Xero executive general manager, money, Leigh O’Neill said: “Cash flow is a major challenge for many small businesses.

“Our research uncovers some troubling signs about how Australian small-business owners are coping in the face of today’s volatile and uncertain economy and the sacrifices they are making to keep their businesses going and employees paid.”

Financial stress impacting wellness

When asked about the emotional and physical impacts of cash flow management, business owners reported feeling stress (57 per cent), anxiety (50 per cent) and having trouble sleeping (48 per cent) over the last 12 months.

Indeed, previous Xero research has found the overall wellbeing of Australian small business owners was below that of the general population and Australia had the second-lowest overall wellbeing of the seven countries surveyed.

“The stress of managing cash flow is having a detrimental impact on small-business owners, affecting their livelihoods and happiness,” Ms O’Neill said.

"That’s why it’s never been more important to plan, forecast, and have a strong contingency plan in place to weather the storm and to support their positive wellbeing.”

The report comes after ScotPac’s SME Growth Index 1Q23 report highlighted that smaller small- to medium-sized enterprises (SMEs) with annual revenue of up to $5 million were three times more likely to rely on personal finance facilities, such as credit cards, in order to manage increasing business costs when compared to larger SMEs.

Moreoever, a recent episode of The Adviser’s In Focus podcast (sponsored by Prospa), heardd national sales manager Roberto Sanz outline how brokers can help support SMEs with their cash flow in the lead-up to the end of the financial year.

If you want to find out more about how small businesses are looking to take advantage of tax benefits and fund growth for the year ahead, tune in to the episode, In Focus: How brokers can help SMEs at EOFY and beyond, below:

[RELATED: SMEs avoid personal finance to fund business costs: ScotPac]