Big trends in small business finance for 2016

December 17th, 2015

Small-business owners often take this time of the year to think about how they can make the most of the new year. While this mentality can be applied to every aspect of a company, financing is perhaps the most useful area to pursue.

To help small-business owners make the most of their financial position in 2016, we've outlined five of the biggest trends that are shaping the way companies will perform in the new year.

Almost eight in 10 family firms are predicting growth in the coming months.

1) Financing growth is an important focus

2016 will see many businesses looking to finance new growth. After a number of years of mixed business confidence and weak conditions, companies are now drafting proactive expansion plans.

A recent KPMG study into family business finance highlighted just how prevalent this broad objective is. According to the research, almost eight in 10 family firms are predicting growth in the coming months.

Given how important a company's financial situation is for finding new opportunities, business owners will be looking closely at their books to determine whether or not they are able to make these investments. Whether they are planning to purchase equipment or put resources into a new branch, the company's financial situation will be the main determining factor in these efforts.

While financing growth in general is an important concern for businesses, cash flow is one specific area that will underpin a company's ability to invest in its expansion.

            Are you ready to start your business growth on the right footing in 2016?

2) Cash flow will remain a concern

Cash flow is a persistent consideration for small-business owners in Australia, and 2016 will likely be no different. According to the KPMG study, cash flow was the second-most common concern among family businesses.

The issue of cash flow also has a major impact on the performance of the third-most important concern family businesses have: net profits. Given how tightly profits and cash flow are connected, finding ways to boost revenue will also offer a key benefit for those looking to expand their profits.

The importance of cash flow for small businesses is part of the reason for our third-most-significant trend for 2016 – the steady rise of debtor finance.

3) Debtor finance will continue to grow in popularity

There is no doubt that debtor finance has quickly moved from a new trend in small business finance to a staple for B2B payments.

In the future, debtor finance will continue to grow in popularity, driven by the solid demand for this innovative finance option. According to the recent 2016 Financial Priorities Survey from the Financial Executives Research Foundation, maintaining working capital and having solid cash flow forecasts were two of the biggest goals for the new year. Both of these are also areas where debtor finance can assist.

2016 will be the year small businesses professionalise their accounts payable.

While debtor finance will be a useful strategy for companies to invest in, small businesses are also looking to understand their accounts payable in more detail.

4) Companies will focus on improving their processes around accounts payable

Businesses are always looking out for new strategies to get their accounts payable into a better position. For many small businesses, 2016 will be the year they focus on professionalising these processes and implement best practices.

A recent report from Deloitte suggested there are six strategies companies can pursue to achieve this:

  1. Centralise their accounts payable processes: If your business has a number of staff making purchases, ensure they are working together and using the same system in order to prevent miscommunication or duplicate orders.
  2. Move towards a paperless operating environment: Automating accounts payable isn't just about saving paper, it's about giving your staff more time to focus on other responsibilities.
  3. Focus on their governance practices: Do you have a strategy to prevent mistakes when ordering goods or services? Putting these in place can ensure your business runs a lot smoother.
  4. Set up a supplier portal: Use digital tools to give suppliers an opportunity to track their relationship with your company through a single format.
  5. Create a management workflow: This can help to identify and prevent bottlenecks within a business.
  6. Strengthen the oversight of purchasing decisions: This step is all about making sure that big purchases aren't signed off by your most junior staff member but instead are escalated to the right manager.

While some of these six may be more important than others depending on your business and the level of resources they can devote to these efforts, they give some insight into what accounts payable best practices will look like.

However, while business owners will definitely be looking to incorporate these lessons into their operations, it's also important to create a tailored solution. Mastering accounts payable requires businesses to also understand what is unique about their business and tailor their offering to match.

Finding balance in accounts payable is a major goal for 2016.

5) More businesses will be primed for sale

Finally, one of the biggest trends in Australia is the ageing population, with more and more 'baby boomers' entering their retirement years. While this will have a significant impact on the workforce, it's also going to result in big changes to business finance, particularly among those looking to sell their companies.

For small-business owners who are in a position where they need to sell, financing is going to be one of the biggest factors in the sales process. Improving revenue and minimising costs early in the new year can ensure they receive a price that meets their personal savings goal as they move into retirement.

Even those who aren't planning on selling their companies and retire in the new year will still need to be aware of the opportunities that might come in this area. If more enterprises are being sold in Australia, there will be more potential acquisitions for others to consider. Financing possible acquisitions will require small-business owners to have access to capital and a strong balance sheet.

This video from Kochie's Business Builders gives some insight into why more enterprises will be up for sale in coming years and how owners can prepare for that:



Making the most of 2016

While these are just some of the conditions that are affecting the finances of Australia's small businesses, they all reflect the uncertainty that businesses are experiencing. The good news is that companies are being proactive and putting in place strategies now to ensure they are financing their growth throughout the next 12 months.

If your business needs any help with working capital management via a business line of creditdebtor financing or asset financing, contact Earlypay’s helpful team today on 1300 760 205 or visit our sign-up form.

If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].