Cash flow variables a business growth killer says study

Some $6.12bn worth of growth opportunities fall through the cracks of Australian mid-sized businesses every year due to insufficient or variable cash flow, according to research released by American Express today.

More than one-third (40 per cent) of mid-sized CFOs admit their business has been delayed or unable to achieve a strategic business objective due to cash flow pressures.

Alarmingly, 81 per cent of mid-sized businesses miss growth opportunities every six months or less, with the average cost of each missed opportunity costing Australian businesses around $35,000.

While the outlook for mid-sized organisations is very optimistic, with 65 per cent of businesses forecasting growth in 2017, a Special Report from American Express, Behind the balance sheet: unlocking hidden value in credit, reveals cash flow pressures constrain mid-sized businesses from achieving their full growth potential.

Despite the opportunity presented by credit, many organisations still opt for cash over credit, rather than using cash to fund business initiatives, and using credit to manage cash flow.

Martin Seward, ‎Vice President for Small & Medium Enterprises at American Express Australia said by sticking with tried and tested cash flow management methods, businesses are burning through available cash in the bank and limiting their room to drive forward strategic objectives.

“When credit is used to manage predictable cash flow, CFOs can unlock hidden value in their business as well as ease the burden of cash flow management,” Seward said.

“While cash flow management will always be a top priority for CFOs in mid-sized Australian companies, the role of the modern CFO has evolved to become a key strategic lead within the business.

“In an increasingly competitive economy, the modern CFO cannot afford to miss business opportunities due to cash flow pressures nor expend all their energies pouring over the weekly ebb and flow of cash.”

“The benefits of using credit as a cash flow management tool are three-fold – an extended interest free period delays upfront payment, keeping cash in the business for longer, while lining supplier payments up with statement cycles helps receivables arrive before expenses are due,” Seward said.