In 2018, SME’s made up for 57% of Australia’s GDP. That is close to 741 billion AUD. With that sort of force driving the Australian economy, you would expect most of these businesses to have their finances secure and cash flow healthy and aligned.

Well, not exactly.

A recent study undertaken in 2020 discovered that over 70% of small business owners had experienced cash flow issues within their business. These business owners had admitted to delaying payment to themselves or employees, with some responses confessing to not paying themselves at all when cash was scarce. That’s a pretty hefty cash flow problem.

So, why do small businesses experience cash flow issues more? Here at BUSINESSNAV, we identified 3 common factors that small businesses often overlook.

1. Optimism and Pessimism

Emotions are bound to be high when starting a business. However, research suggests that business owners underestimate their start-up and overhead costs, then subsequently expect profitability too quickly. Without prior planning and budgeting, business owners lose track of their cash flow, severely hindering growth and operating effectively as a business. You must approach planning your business with realism, creating time frames and budgets that are accurate to your financial data.

2. Tracking Receivables

Your business may be rocketing in sales, but if your customers are slow to pay you and allow your past-due receivable invoices to become lost beyond the due-date, you automatically put yourself in a cash flow disadvantage. Understanding receivables in small businesses are more blurred. Some services are done in good faith or promote the business, which can easily get lost in translation between real outstanding receivables, and those that fall in between the lines. Delayed payment disrupts growth, disrupts company morale, and makes your business an easy target for risky debtors to approach. As a small business, it is imperative to ensure you perform credit checks on new customers and that your terms & conditions are solidified to avoid any pitfalls.

3. Poor Financing

Often in a small business, it is challenging to manage all the financial facets without either hiring internally or going through a third-party financier. This leads to lots of owners cutting corners and not providing enough scrutiny towards certain aspects of their business’s financial side, which is frequently revolved around cash flow and capital. Specifically, failure to create and follow a high-quality cash flow forecast will almost certainly result in the business following a negative cash flow model. Basically, if you give a 60-day payment term to your customers, but you have to settle rent, utility bills, and other overheads weeks before you pay yourself, you’ll see negative cashflow. No matter what your business does, you are always going to be behind.

Therefore, it is important to set up an accurate and well-built financial arsenal, including balance sheets, profit and loss statements, cash flow statements, and cash flow forecasts that flesh out your business’s internal finance. If you want the best possible financial advice, employ financial and accounting experts so you can focus on the parts of your business you are the expert in.

 Need for Expert Financial Advice or Want to Solve Your Cash Flow Problem?

Here at BUSINESSNAV, we are experts in assisting companies in unlocking their revenue potential by navigating their cash flow to safety, security, and sustainability. This, in turn, does wonder for the growth of the company. We help nurture that potential and transform that into quantifiable results. Call us on 1300 BIZ NAV (249 628) or email us at and talk to us about how we can help grow your business!