The business sentiment of Australian SMEs has fallen 15 points to levels experienced just after the global financial crisis (GFC), according to a new survey.
Bibby Financial Services stated reasons behind the decline include a negative backlash against the Abbott government and its recent budget, and a depressing outlook on the global and Australian economy.
The Bibby SME Cash Flow Index revealed a score of -10.1, a fall of about 15 points from +5.3 in February this year. This latest score is the lowest on record since August 2012 when the Index recorded -11.2 and SMEs were struggling to survive the aftermath of the GFC.
Survey participants stated the federal government should be doing more to help small business, with 45 per cent believing the Abbott government is not stacking up well compared to the previous government.
“SME’s gloomy economic outlook is mirrored by the broader Australian investment community, as measured by the other industry surveys. SMEs are generally concerned about a decline in consumer spending, the direction of interest rates and maintaining a healthy cash flow," Bibby Financial Services A/NZ managing director, Mark Cleaver, said.
The survey found the industries most pessimistic towards government are retail (66 per cent) and manufacturing (64 per cent).
A substantial number of SMEs do not believe initiatives handed down in the May budget will be effective for SMEs, believing the Paid Parental Leave levy (47.5 per cent), Entrepreneurs Infrastructure Program (41 per cent), Company tax decrease (40 per cent) and Industry Skills Fund (44 per cent) will have a low impact on business.
The incentives most likely to have an impact are the reintroduction of the Fuel Excise Levy (52 per cent) and the increase of Superannuation Guarantee (45 per cent).
More than a third of SMEs expect sales growth to remain flat in the next 12 months and those expecting a decline in growth has increased from 10 per cent in February to 15 per cent. Three in ten SMEs believe the Australian economy will contract over the coming year.
“Managing cash flow continues to be an issue for SMEs, with two in five finding it more difficult than 12 months ago,” Cleaver said.
The factors most impacting SME cash flow were customers making excuses for slow payments (23 per cent), declining margins (21 per cent), long outstanding invoices (18 per cent) and issues with government red tape (16 per cent).
Kristen Turnbull, Head of Financial Services, CoreData Consulting, “As a result of poor cash flow, SMEs are planning to borrow more over the next 12 months. Reasons for seeking additional financing include to fund growth (30 per cent), refinance existing debt (26 per cent), funding for working capital (22 per cent) or to undertake innovation projects (19.5 per cent).”
“A quarter of SMEs plan to use credit cards as a main source of external financing in the coming 12 months, ahead of traditional bank loans or overdrafts (both 20 per cent),” Turnbull said.
A further quarter of SMEs believe they are not receiving the level of funding they desire from their bank, citing issues of insufficient security (19 per cent), a lack of security (18 per cent) and insufficient trading history (12 per cent); and one in five are using personal property to secure financing.