Small business study to focus on cash flow management

New research at Griffith University will investigate how small businesses manage cash flow, and how this influences the survival of a business.

The study will examine the connection between taxation and cash flow in businesses with an annual income of less than $10 million dollars.

“Small businesses are an important part of Australia’s economy, and a healthy small business sector makes for a stronger economy,” Melissa Belle Isle, PhD researcher at Griffith Business School, says.

“Almost 96% of all Australian private sector businesses are small businesses, providing employment to 4.8 million people.”

The nationwide study takes place in an economic climate where less than 2% of businesses with an annual income under $2 million are surviving. In 2014/15, the survival rate for small businesses was estimated at 1.8% with 255,571 businesses exiting as 277,099 entered the sector.

Melissa web“Cash flow is possibly one of the reasons why small businesses fail to survive, and tax has been identified as one of the issues around cash flow,” Melissa Belle Isle says.

“My aim is to uncover the problems small business owners have to deal with when it comes to cash flow.

“Research suggests that taxation and the level of financial statement, accounting software and taxation literacy of small business owners may have a positive bearing on ongoing financial stability.”

“A greater understanding of these relationships could improve the survival rate of small businesses in Australia. In particular, identifying strengths and weaknesses in the understanding of business tax systems could lead to important recommendations to help the sector.”

Pilot

Melissa is initially seeking 24 small business owners (and/or their advisors in the service sector) to take part in a pilot study involving a short interview. The project will subsequently be scaled up for an online survey of 500 businesses around the country.

“I want to know how they manage their cash inflows and cash outflows, and whether they have any systems in place to manage this. Are they using computer accounting software to its full potential? How comprehensive is their reading of financial statements? Which business tax systems are they using and are they the right systems for the right business?

“The findings will provide a more comprehensive knowledge of cash flow management and its relationship with tax obligations and owner literacy in terms of taxation, computer accounting software and financial statements.”

Register

Small business owners and their advisors in the service sector such as retail, medical, construction, hospitality, professionals, wholesale and transport are being sought to participate. If you would like to be part of this important research, please contact Melissa Belle Isle on 0411074214 or m.belleisle@griffith.edu.au to set up a 20-minute interview.

You can also register your interest to participate online.

  • Contact Melissa Belle Isle on 0411 074 214