Small business owners are feeling rising levels of distress as their cash flows are threatened by creditors becoming insolvent and their own ability to meet commitments.
The Australian Small Business and Family Enterprise Ombudsman released figures today showing a 50 percent jump in requests for help from distressed business owners.
The Ombudsman, Bruce Billson, said payment disputes were an early warning sign of a cash flow problem.
“Cash flow is the oxygen of enterprise, but difficult conditions mean when one party is late in paying, it can cascade through the supply chain,” Mr Billson said.
“Payment disputes are by far the greatest area of concern for small and family businesses and now account for 42 percent of assistance cases, up from 36 percent last year.
“The construction industry had the highest number of payment disputes while in the hospitality area the number has tripled over the past 12 months.”
Mr Billson said there were 6254 requests for assistance in 2023-24, up 10 percent from the previous year.
Over the period, the number of requests for help with insolvency increased by 50 percent.
“Over the past year, small and family business owners have become increasingly worried about being paid as they face challenging business conditions which has seen a record number of corporate insolvencies,” Mr Billson said.
“Cost of living pressures for households are cost of doing business pressures for small businesses such as rising input costs such as wages, energy, insurance and rent while the Tax Office has resumed its tougher enforcement approach.
“Many small businesses are drawing on their cash buffers to keep their business afloat. Recent surveys have found nearly one-in-four have no cash reserves while 18 percent have less than a month’s cash at hand to fulfil their obligations.”
Mr Billson said small businesses were also crying out for help dealing with Big Tech digital platform providers and disputes involving a digital service now accounted for just over one-in-four new cases.
“The number of cases we’ve seen involving a small business having problem with a digital platform has more than doubled since July 2022,” he said.
“Digital platforms have fundamentally changed the way small businesses connect and sell to their customers. Yet, when there is a problem – such as having your account shut down after being hacked – solving it can be a nightmare.
“In too many cases, when there is a problem, the digital platform providers require a time and resource-poor small business to navigate the most elaborate maze of dead-ends and blockages.”
Small and family businesses with a dispute can find more information and guidance on the ASBFEO website – asbfeo.gov.au
