SMEs still against the ropes

Written on the 2 December 2010

AUSTRALIA is passing through the eye of the economic storm but is facing at least another year of difficult economic conditions, according to Vincents Chartered Accountants.

Vincents director of insolvency and reconstruction Nick Combis, says despite markets experiencing a relatively steady period, insolvency of small to medium sized companies had continued to increase.

“Turnover for SMEs is currently down 15 to 25 per cent, which is very significant considering Australia has supposedly been through the worst of the GFC,” he says.

“Unfortunately for many operators, the flow-on from world markets is still in full effect and until the market corrects itself, I can’t see the current trends stopping in less than a year.”

Combis says SMEs are increasingly in two minds about forward planning.

“On one hand, SMEs, particularly in retail and hospitality, want additional cash flow to carry on during the slowdown but on the other, they are constrained by overdrafts because banks are not lending as much due to the uncertainty,” he says.

“Large obligations, such as leasing costs, stay constant regardless of market conditions so businesses like small retailers are already looking for ways to insulate themselves until well after the election.”

Banks are putting downward pressure on small businesses, with many forced to sell off assets to keep in operation.

Combis says there are still issues to settle before the budget is back in surplus and the best course of action for SMEs is to maintain a ‘disciplined operation’.


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