Mark Cleaver

Only one in every three businesses in Australia makes use of a financial adviser. While this proportion is surprisingly low, there is an opportunity for financial advisers, with three in 10 businesses saying they intend to engage an adviser in the next 12 months.

These findings come from the latest Bibby Barometer, which has been conducted bi-annually since July 2011 and gauges Australian business sentiment on economic conditions, cash flow, financing and key business challenges.

The survey of 620 business owners, conducted Bibby Financial Services in March, found that just one in three businesses uses a financial adviser, but that three in 10 businesses which currently do not use a financial adviser, intend to use one in the future. However, around one in five businesses have no intention of using a financial adviser at all, possibly reflecting a lack of confidence in the financial planning industry.

Mark Cleaver, Managing Director, Bibby Financial Services Australia and New Zealand, said: “The financial advice industry has gone through a huge shake-up in recent times. Press coverage of banks giving poor financial advice could well have deterred many businesses from seeking financial advice. At Bibby, we encourage businesses to take independent advice from qualified and well-respected financial advisers. In our experience, businesses that seek financial advice make better decisions and are better placed to manage their cash flow.”

The March 2015 Bibby SME Cash Flow Index score of -3.3 reveals that overall cash flow sentiment remains weak among Australian businesses. The Index remains in negative territory and is considerably lower than it was in February 2014 (+5.3), although it has improved from its July 2014 score of -5.8. The Bibby Cash Flow Index, which forms part of the Bibby Barometer, is a composite measure of current cash flow and forward projections, providing a snapshot of Australian businesses’ cash flow expectations.

“The most common areas where businesses seek advice are business advice (59%), tax (57%) and superannuation (33%), while they also seek advice on investing (29%), managing risk (23%) and property investment (20%),” Mr Cleaver said.

“Business advice is less commonly sought by micro-businesses. However, they are more likely than larger businesses to receive advice on other areas, particularly tax, investing, superannuation and family financial matters.

“Family-owned businesses are more likely to use a financial adviser (36% versus 27%), possibly reflecting the fact that the families have more of their financial future tied up in their businesses and are therefore more ready to seek advice,” he said.

By state, respondents in Western Australia are the most likely to use a financial adviser (47%), while those in New South Wales have the greatest intention to use one in the future (33%).

“Queensland respondents are the most likely not to use a financial adviser in the future (25%), which could be due to the optimistic outlook held by these businesses in terms of their future prospects and hence the perception that it’s not necessary,” said Mr Cleaver.

“Businesses in manufacturing are the most likely to use a financial adviser (49%), possibly because of their general pessimism about the economy and cash flow difficulties, which are greater than those of businesses in other sectors.”

“The general reluctance to seek financial advice could also be due to the fact that one in five businesses holds its assets in cash rather than in riskier assets. Compared to July 2014, the proportion of businesses holding more than half of their assets in cash and cash equivalents has fallen slightly (20% versus 22%), possibly reflecting persistently low interest rates,” Mr Cleaver said.

The Bibby Barometer involved questioning businesses employing between 1 and 199 people. Almost half the businesses (46%) employ 20 to 199 people, while close to two in five (38%) employ five to 19 people and one in six (17%) owns a business that employs one to four people. Slightly more than half of the businesses surveyed are family-owned.

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Mark Cleaver

New research conducted by Bibby Financial Services in March shows that 40% of small and medium-size enterprises (SME) are finding it more difficult to manage their cash flow than 12 months ago.

The research revealed that businesses are forced to tackle cash flow concerns by ceasing to trade with customers who consistently pay late (25%), by spending more time chasing invoices (23%) and by offering discounts for early payment (19%). Also, 29% of businesses surveyed are now insured against the risk of bad debt, nearly double the proportion in July 2014 (15%).

The March 2015 Bibby SME Cash Flow Index score of -3.3 reveals that Australian businesses are concerned about cash flow. The Index, which is the only measure of cash flow among Australian SME businesses, remains in negative territory and is considerably lower than it was in February 2014 (+5.3), although it has improved from its July 2014 score of -5.8. The Index is a composite measure of current cash flow and forward projections, providing a snapshot of Australian businesses’ cash flow expectations.

The index forms part of the Bibby Barometer, which has been conducted bi-annually since July 2011 and gauges Australian business sentiment on economic conditions, cash flow, financing and key business challenges.

Mark Cleaver, Managing Director, Bibby Financial Services Australia and New Zealand, said: “The latest Bibby Barometer findings are deeply concerning. SMEs are a major part of the economy and nearly half of them (47%) are more concerned about economic conditions than they were a year ago, while three in ten (29%) think that the Australian economy will actually contract over the next 12 months. These views are reflected in bearish sales growth expectations, with 28% expecting a decline in sales over the next 12 months, up from 22% in July 2014.”

“The majority of the 620 businesses surveyed in the research are medium-size businesses, employing up to 200 people. These are significant businesses that, if confident about their prospects, have the collective ability to boost national economic growth, employment and productivity. Unfortunately, general pessimism about the economy and government initiatives continues to stifle their business confidence.

“Businesses are not convinced that government policy initiatives introduced in the past 12 months have helped. Fewer than half the businesses surveyed think that these policy initiatives have helped them to grow (43%) or provided them with confidence in their future (49%),” Mr Cleaver said.

Less than half the businesses surveyed said they had reduced their operating costs (43%), hired more staff (45%) or improved their access to finance (48%) as a result of government policy initiatives.

“The Federal Government needs to take note of this. SMEs don’t feel particularly well supported and they don’t feel that government policies have worked to create better or more flexible business conditions. Ahead of the May Federal Budget, the Government should be listening to SMEs to get a better understanding of their needs given their importance to Australia’s growth,” Mr Cleaver said.

“There are some positive signs, however, including an increase in the level of borrowing after several years of below trend growth in business lending. Two in three businesses intend to maintain or increase business investment over the next 12 months. Medium-size businesses are the most likely to maintain or increase their investment (72%), while micro-businesses are the least likely to maintain or increase their investment (56%).

“Among businesses that intend to borrow over the next 12 months, 32% say they will borrow to fund growth, while more than one in five (22%) will borrow to fund innovation projects, with both of these percentages rising from July 2014. This is a positive sign that some businesses, in an effort to counter a stagnant economy, are becoming more proactive in driving growth,” Mr Cleaver said.

The Bibby Barometer involved questioning businesses employing between 1 and 199 people. Almost half the businesses (46%) employ 20 to 199 people, while 38% employ five to 19 people and 17% own a business that employs one to four people. Slightly more than half the businesses surveyed are family-owned.

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Mark Cleaver

While small and medium sized businesses (SMEs) are turning to social media to help grow their brands, many are reluctant to invest in technology generally, according to the latest SME survey from small business finance specialist Bibby Financial Services.

Conducted by CoreData in February, the Bibby Financial Services Small Business Barometer revealed Facebook is the most popular social media tool for SMEs – with more than two in five respondents (43%) using it for their business.  Other common social media channels include LinkedIn (23%), Twitter (19%) and Google+ (16%).

Moreover, 22% of SMEs expect sales growth to come from social media, highlighting its potential to boost revenues.

The survey also revealed close to two in five (38%) small businesses believe websites are the most valuable type of technology. Other technology mediums seen as advantageous include social media (35%), high-speed broadband (31%) and smart phones (31%).

However, despite the perceived benefits of technology, the majority of SMEs do not currently have plans for increasing their technology investment. Fewer than one in three respondents (31%) expect to increase or significantly increase their investment on technology in the next year. A small proportion (5%) intend to reduce their technology spend while a further 12% are unsure.

Mark Cleaver, Managing Director, Australia and New Zealand, said: “Technology can equalise the playing field between big and small business. Whether this involves spending more on faster computers, social media or on software that makes a business’ operations more efficient, technology investment is crucial for keeping up with competitors and the needs of customers.

“Despite this, our survey revealed three in 10 SMEs (29%) don’t believe that technology will offer any advantage over bigger businesses. Moreover, two in five SMEs (40%) don’t currently use mainstream social media tools to promote their business.

“SMEs need to use all the tools that they have available to build their businesses and brands in a highly competitive landscape. Social media is an effective and low-cost marketing tool that can help SMEs keep up with the efforts of bigger businesses,” Mr Cleaver said.

The survey found that more than 62% or three in five small businesses have a website. Of these, 45% use it mainly to share information and promote their brand. Close to three in 10 SMEs (28%) use their websites to funnel potential clients to call, email or visit in person in order to make a sale.  Just one in four SMEs (27%) take it one step further and use their websites to sell products and services.

“E-commerce is becoming more important in the economy. SMEs can score goals against big business by making sure they have online transaction facilities to sell products or services rather than relying on physical transactions,” Mr Cleaver said.

In terms of social media usage, the survey found Facebook is most popular with respondents who have businesses in the accommodation and food services industries, with 77% using it for their businesses. It is also popular with those from arts and recreational services (70%) and the retail trade sector (56%).

The industries where businesses are least likely to utilise any social media are household and personal services (73%), construction (62%), and agriculture forestry and fishing (60%).

The Bibby Barometer SME survey is conducted bi-annually on over 850 small and medium sized businesses, Australia-wide, on business sentiment towards economic conditions, cash flow management, financing and key business challenges. Each year, SMEs are asked about their hopes for the Federal Budget.

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