World News

Report Finds Cash Flow Problems in 80 Percent of Australian Businesses


Many businesses are tapping into owners’ personal savings to navigate through declining revenue, low cash reserves, and seasonal fluctuations.

Nearly 80 percent of small to medium businesses (SMBs) in Australia have faced cash flow issues in the past year, with 27 percent of owners resorting to using personal savings or foregoing a salary, or both.

These findings are from a recent survey commissioned by Commonwealth Bank and conducted by the University of New South Wales (UNSW).

The Sydney Business School at the university surveyed 507 business owners between Oct. 31 and Nov. 5, 2024.

The primary factors affecting cash flow were declining revenue (35 percent), low cash reserves (30 percent), and seasonal fluctuations (27 percent).

However, the majority (85 percent) had implemented one or more strategies to handle the situation, such as cutting expenses (34 percent) or maintaining a cash reserve (27 percent).

Some businesses were also seeking additional revenue streams (26 percent) and looking to increase sales or prices (25 percent).

CBA’s Executive General Manager of Small Business Banking, Rebecca Warren, emphasized the importance of cash flow strategies for sustained business success.

“For small businesses, success often relies on a delicate balance as they manage various aspects of their operations. The economic challenges of the past year have understandably impacted many Australian SMBs,” she said.

Warren added, “While it’s good to see small business owners taking proactive measures to manage cash flow, actions like using personal savings or forgoing a salary may not be the best solution for the long term.”

Increased Business Failures

In response to these issues, Commonwealth Bank and UNSW have created a customized, free online course to help Australian small business owners improve their understanding and management of cash flow.

This course is open to all 2.5 million small businesses in Australia, regardless of their banking relationship with Commonwealth Bank.

The survey also found that 53 percent of business owners were interested in taking a business management course or receiving further training.

Last year saw a rise in business failures, reaching the highest level since the start of the pandemic based on CreditorWatch data.

By November 2024, the failure rate had climbed to 5.04 percent from 3.97 percent in October 2023.

The company attributed this increase to rising costs affecting both consumers and businesses, including higher electricity, insurance, and rental expenses, alongside the ATO’s tougher stance on collecting overdue tax payments.

The food and beverage sector bore the brunt, with an 8.5 percent failure rate.

CreditorWatch projected this figure to hit 9.1 percent in 2025 as consumers restrained their discretionary spending.

From a regional standpoint, Western Sydney and Southeast Queensland faced the highest risk of business failure, while areas around inner Adelaide, regional Victoria, North Queensland, and the northern suburbs of Sydney were at lower risk.



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