The #1 Challenge Facing 40% of Australian SMEs- And How to Tackle It
In 2025, cash flow has become the most pressing issue for Australian small and medium-sized enterprises (SMEs), with 40% of business owners identifying it as their primary concern, according to NAB’s latest SME Business Insights report.
This widespread anxiety is driven by several factors:
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Late payments are a significant contributor:
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48% of invoices issued by SMEs are paid late.
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10% of invoices are settled more than a month after the due date.
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These delays result in an annual cost of approximately $1.1 billion due to payment delays.
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Extended payment terms from large corporates:
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Some request payment terms of up to 90 days, putting pressure on suppliers’ working capital.
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Cash flow challenges have a serious impact on small and medium-sized enterprises (SMEs) in Australia. Over 27% of SMEs have had to dip into their personal savings just to keep their businesses afloat, and according to the Australian Securities and Investments Commission (ASIC), poor cash flow contributes to 40% of business failures. These figures underscore the importance of effective cash flow management as a critical factor in the survival and long-term success of small businesses.
Several strategies for SMEs to better manage cash flow:
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Implement stricter invoicing policies to ensure timely payments.
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Offer early payment discounts to encourage faster client payments.
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Consider invoice financing or factoring to access funds before invoices are paid.
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Conduct regular cash flow forecasting to anticipate and manage upcoming expenses.
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Maintain a cash reserve as a buffer against unexpected financial challenges.
By proactively managing cash flow, SMEs can improve their resilience and sustainability, helping them thrive despite economic uncertainties.
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