What causes SME owners stress?
There was a great article by Derek Parker of The Australian late last year. The article referred to a survey conducted by credit card giant American Express examining the most common causes of business-related stress and frustration.
The major sources of stress reported by SME owners were identified as cash flow issues, along with tax compliance. However, the majority of small business owners reported that they become better at managing both cash flow and tax after a few years of operation – particularly those that said they sought guidance.
The research found that small business owners rate cash flow management and tax compliance, especially BAS and tax reporting, as bigger problems than having too few customers.
Parker notes in his article some not-so-surprising statistics from the survey, with BAS and tax reporting being rated the major burden by nearly three-quarters of small business owners, principally because of the time it takes (mentioned by 51 per cent). The key areas causing stress are the worry of not getting the information correct (39 per cent), keeping track of the receipts and invoices (38 per cent), and getting BAS and related reports in on time.
According to the survey, most SME principals choose to lodge their BAS on a quarterly basis. BAS and tax reporting is more likely to be a problem for small businesses with a turnover of more than $500,000 a year (41 per cent) and those that have only been in business for two years or less (43 per cent). Managing cash flow is also more likely to be an issue for those turning over more than $500,000 a year.
Develop a more regular routine for updating records for tax reporting
Also of interest was how much time is spent on BAS returns by small business owners. The average time spent was 8.3 hours, equivalent to more than one working day in preparing each quarterly BAS. A much longer average time was reported when accounting packages were not being used. The best strategy for reducing the hassle of tax reporting seems to be maintain your records on a regular weekly or fortnightly basis rather than allowing them to accumulate and then becoming overwhelmed when you have to face it quarter-end
Develop a cash flow strategy
The Parker article also offered some good practical advice about the need to have a cash flow strategy in place within the business.
"Extending credit to a customer, especially a new one, should not be automatic. Before extending credit, it can be useful to talk with other people who have dealt with the same company. If a potential client is unwilling to supply references for checking, that itself can be a warning flag. It's also important to make sure that clients have no excuse to delay or defer payment. Make a few phone calls so you understand a bit about their payment system, such as identifying the person who is the contact point for invoices. Some companies have pro forma invoices that have to be used, and have preferred payment methods.
At the same time, your own invoices should be absolutely correct, including your ABN, an accurate description of what the invoice is for, and the date by which payment should be made. If a payment is not made when it should be, the matter should then be followed up immediately. By ensuring your invoice details are fully and correctly completed, this cannot then be used as an excuse for the delay in payment"
So in summary, if you are a small business owner struggling with these same issues, you may perhaps take some small solace from the fact you are not alone. However, also consider there are some relatively simple actions you can take to help prevent much of this stress. And remember the importance of maintaining a positive attitude - you may be interested in one of our earlier posts, Your Attitude, Friend or Foe And also Stress Management Tips offers some great advice on coping with stress