Small Business Cash Flow Education Research 2017 …...In 2016, the ATO commissioned a research...

Small Business Cash Flow

Education Research 2017 Prepared by IPS Management Consultants for the ATO Authored by: Dr Katie Roe and Katina Law

SMALL BUSINESS CASH FLOW EDUCATION RESEARCH 2017

Australian Taxation Office P a g e | 2 Indigenous Professional Services

Contents

LIST OF FIGURES ................................................................................................................... 3

EXECUTIVE SUMMARY ........................................................................................................ 5

PROJECT AIM .................................................................................................................... 11

Research Aims ............................................................................................................... 11

METHODOLOGY ............................................................................................................... 12

Qualitative Research .................................................................................................... 13

Quantitative Research ................................................................................................. 14

RESEARCH FINDINGS ........................................................................................................ 16

Financial Knowledge .................................................................................................... 16

Advisors to Small Business ............................................................................................. 20

Small Business Financial State and Cash flow ............................................................ 26

Developing Business and Financial Knowledge ........................................................ 36

APPENDICES ...................................................................................................................... 42

APPENDIX 1: DEMOGRAPHICS .................................................................................. 42

APPENDIX 2: SMALL BUSINESS QUALITATIVE INTERVIEW DISCUSSION GUIDE ........ 49

APPENDIX 3: TAX PROFESSIONALS’ QUALITATIVE DISCUSSION GUIDE ................... 52

APPENDIX 4: QUANTITATIVE SURVEY FOR SMALL BUSINESS ..................................... 54

APPENDIX 5: QUANTITATIVE SURVEY FOR TAX PROFESSIONALS ............................. 74



LIST OF FIGURES Figure 1: Length of time in business. .................................................................................................... 5

Figure 2: Small business perspectives on cash flow. ......................................................................... 7

Figure 3: Actions taken by small businesses to resolve cash flow issues. ........................................ 8

Figure 4: Participants. .......................................................................................................................... 13

Figure 5: Tax professional area of expertise. .................................................................................... 13

Figure 6: Geographic range of interview participants. .................................................................. 13

Figure 7: Quantitative Participants. ................................................................................................... 14

Figure 8: Tax professional areas of expertise. ................................................................................... 15

Figure 9: Where small businesses sought help during start up. ...................................................... 16

Figure 10: Small business owners self-reported knowledge. .......................................................... 17

Figure 11: Small business owners’ self-reported ability. ................................................................... 18

Figure 12: Small business owners’ self-reported knowledge and confidence. ............................ 19

Figure 13: Who small business owners seek advice from. .............................................................. 20

Figure 14: Who small business owners rely on for advice regarding tax and superannuation. . 21

Figure 15: How often small businesses interact with their main provider of advice. ................... 22

Figure 16: How often tax professionals report interacting with their small business clients. ....... 22

Figure 17: Services small business owners identified as offered by their main provider. ............ 23

Figure 18: Small business owners’ responses to a serious of questions relating to their business advisors. ....................................................................................................................................... 24

Figure 19: Reasons small business owners don’t interact with their advisor. ................................ 25

Figure 20: Tax professionals’ reasons why small business owners don’t interact with their advisors as often as they should. .............................................................................................. 25

Figure 21: Small business views of the financial state of their business. ........................................ 26

Figure 22: Age of business and self-reported financial state. ........................................................ 27

Figure 23: Small business current financial state and their ability to manage cash flow. .......... 27

Figure 24: How often small businesses manage their cash flow. ................................................... 28

Figure 25: Summary of how often small business owners manage their cash flow. .................... 28

Figure 26: When do small businesses start having cash flow issues? ............................................. 29

Figure 27: Tax professionals’ observations of when businesses experience cash flow issues. .... 29

Figure 28: Typical causes of cash flow issues as identified by small businesses. .......................... 30

Figure 29: Typical cash flow issues as identified by tax professionals. ........................................... 30

Figure 30: Actions taken by small businesses to resolve cash flow issues. .................................... 31

Figure 31: Advice tax professionals give to small businesses to better manage their cash flow. ...................................................................................................................................................... 31

Figure 32: Cash flow tool used by small businesses. ........................................................................ 32

Figure 33: Cash flow tools recommended by tax professionals to their entire small business client base. .................................................................................................................................. 33

Figure 34: The reports generated by software programs are helpful in managing cash flow as perceived by small businesses. ................................................................................................. 33



Figure 35: The reports generated by software programs are helpful to small businesses in managing cash flow as perceived by tax professionals. ...................................................... 34

Figure 36: Age of business and cash flow management tool used. ............................................. 35

Figure 37: View of small businesses improving knowledge about business management. ....... 36

Figure 38: Tax professionals’ view regarding the importance for small businesses improving their knowledge about business management. .................................................................... 37

Figure 39: Small business and cash flow. .......................................................................................... 38

Figure 40: Preferred source for information and training by small businesses. ............................. 39

Figure 41: Tax professionals’ view of small business’ preferred sources for obtaining cash flow and financial management information or training. ............................................................. 39

Figure 42: How tax professionals assist small business. .................................................................... 40

Figure 43: Most preferred method of obtaining knowledge. ........................................................ 41

Figure 44: Where is your main business located? ............................................................................ 42

Figure 45: Age of small business. ....................................................................................................... 42

Figure 46: Number of employees within the small business. .......................................................... 44

Figure 47: Annual Turnover of Participating Small Businesses. ....................................................... 44

Figure 48: Small business participants’ highest level of education. .............................................. 45

Figure 49: Years as a small business owner. ..................................................................................... 45

Figure 50: Small business participant experience in business management. .............................. 46

Figure 51: Types of industries. ............................................................................................................. 47

Figure 52: Ownership structure. ......................................................................................................... 48

Acknowledgement

Indigenous Professional Services would like to thank the ATO’s Small Business Engagement and Support project team for their contribution and support throughout the duration of the

research project. The collaboration throughout the development of this research was extensively shaped by the contribution of the ATO stakeholders and key external

stakeholders.



EXECUTIVE SUMMARY Small businesses comprise the majority of Australian businesses and account for 33% of Australia’s gross domestic product1. Nearly 40% of small businesses fail in the first four years of operation with those most vulnerable owned by sole traders.

The ATO seeks to understand how small businesses manage their cash flow, and who they turn to for advice on financial and business management matters. Developing this understanding enables the ATO to develop and implement effective education strategies to assist small businesses in succeeding.

Building understanding

In 2016, the ATO commissioned a research project to understand the education experiences of new small businesses (up to three years old) to determine if small business owners choose to undertake tax and superannuation tasks independently or whether they choose to use tax professionals for some or all tax and superannuation tasks (IPSOS, 2016)1. The New Small Business Education Research (2016) found new small businesses were generally motivated to learn about tax and superannuation requirements, but barriers such as time, cost and other priorities inhibited engagement in educational opportunities. The research also found learning about tax and superannuation was often reactionary and ad-hoc, with small business understandably being more focused on the day-to-day running of their business.

To build on established knowledge, the ATO commissioned this research to ascertain where small business sought financial and business management help and how they interacted with tax professionals, particularly in relation to cash flow. Some further exploration of the New Small Business Education Research was explored within this research, specifically what education small business owners sought and their understanding of business and financial management. Emphasis was placed on their understanding of cash flow and associated issues. The research also investigated how small businesses wanted to receive information to inform and educate the ATO of the best education delivery approaches. Equipped with this knowledge, the ATO would be in a better position to design and develop engagement strategies and education products that meet small business needs.

A story of survivors

This research has a significant focus on the story of small businesses who have been operating for over five years and many with more than a decade in operation. The 460 small businesses who participated represent diversity in age of business and industry. However, broadly consistent with the age of businesses more generally, 78% of participating small businesses were 11 years or older and 10% were five years old or less as shown in Figure 1. Two-thirds of the business owners who participated said this was their first business, with the remainder having owned another business in the past. Nearly half had more than 21 years of experience owning a small business and the majority of business owners had 11 years or more experience in management roles.

While the 2016 research focused specifically on businesses up to three years old, the inclusion of mature businesses has provided significant insights of their experiences over many years. This longer term perspective on how businesses, that survive the critical first four years, manage and respond to financial and cash flow challenges has further informed our understanding of the education needs of both new and existing small businesses and options for providing appropriate and targeted support.

Figure 1: Length of time in business.

1 Commonwealth of Australia (2016) Small Business Counts | Small businesses in the Australian economy IPSOS (2016) New Small Business Education.

The Australian Taxation Office (ATO) aims to develop a deeper understanding of what drives small business cash flow problems, how small businesses effectively manage cash flow and related

problems, as well as who helps them. In addition, the ATO aims to identify the broader financial management education needs of small businesses, with a particular focus on cash flow.



Source: SB A6 How long has your main business been in operation? (n=460).

In other respects, the sample is similar to the general population of small businesses. The industries represented included retail trade, professional, scientific, and technical, accommodation and food services and manufacturing. Most of the small businesses were sole traders or family owned, with around a quarter being partnerships.

Survivor Characteristics

The significant number of mature businesses (ten or more years) in this study allows us to develop a profile of these businesses in relation to cash flow management, what they have learned/done to help them both survive and grow their business. These businesses share the following characteristics:

• They understand cash flow is important and monitor it daily or weekly.

• They have a desire to learn more about business and financial management and are interested in improving their cash flow management.

• They are willing to adapt to new management practices e.g. adopting online accounting tools.

• Their perceived knowledge has increased considerably over time when compared to how they rated themselves when they first went into business.

• Those who reported increased financial knowledge also rated their business as financially neutral to growing, giving support to the notion that knowledge and success are closely linked.

2%

4%

4%

12%

26%

52%

Less than 1 year

1-2 years

3-5 years

6-10 years

11-20 years

21+ years



Small business perspectives on cash flow

Small business participants understand that cash flow is important. Figure 2 summarises some of those perspectives.

Figure 2: Small business perspectives on cash flow.

94% said they keep track of their cash flow (source SB C2).

51% have experienced cash flow issues (source SB C3).

60% believe it’s very important or important to improve their knowledge about business management and financial management (source SB D1).

Half (51%) have experienced cash flow issues (source SB C3). Reasons given for these issues included a downturn in the economy (34%), personal circumstances (11%), change in the business (9%), and tax or superannuation obligations (6%).

Small businesses surveyed reported that cash flow issues usually arose in the first two years of operation (42%) or after five years of operation (26%). Tax professionals (63%) believed the majority of small businesses have issues during the first two years of operation.

The most common causes of cash flow issues experienced by the surveyed small businesses were identified as related to volume of sales (47%), issues with payment from customers or clients (26%), and expenses (23%). This was consistent with tax professionals who also identified these three factors as the primary causes of cash flow issues for their clients.

94%

6%

51% 49%

60%

40%



Small businesses took a range of actions to resolve their cash flow issues. The main themes related to taking action around planning, work volumes, borrowing, payment issues, costs and expenses, as shown in the Figure 3. The range of actions and the relatively even spread across the top six reflects the diversity of businesses and the fact that different levers work for different business situations and circumstances. However, it is unclear how aware small businesses are of all of these options. This provides the ATO with the opportunity to develop an education strategy to communicate the range of options available to assist cash flow management.

Figure 3: Actions taken by small businesses to resolve cash flow issues.

Source: SB C7 What action did you take to help resolve your cash flow issues? (n=234) Note: multiple responses were permitted.

Most small businesses managed their cash flow using software or web based accounting tools. Also used were online banking, pen and paper, and excel spreadsheets. The majority of small businesses have said the reports from accounting software packages helped them understand cash flow. Only 26% of tax professionals surveyed believed their clients are capable of fully understanding the report from accounting software packages in relation to cash flow management.

21%

18%

18%

17%

13%

12%

7%

7%

6%

2%

8%

9%

1%

Improved planning / management

Expanded volume of work

Reduced expenses

Borrowed money

Efficiencies in staffing costs

Improved payments from customers

Reduced or deferred costs for stock or supply

Reduced costs for business equipment

Pricing

Made an exit plan

Other

Unsure

Prefer not to say



Improving knowledge

Sixty percent of small businesses said it is very important or important to improve their business and financial knowledge. Some of the reasons for this were:

• To be better informed (46%)

• To be more in control of their business (42%)

• To save money (9%)

Those who didn’t think it was important to improve their business and financial knowledge felt they were already competent (40%), that it wasn’t important to them (34%) or they weren’t interested (18%).

Most businesses:

• Were interested in improving their cash flow management (58%)

• Felt understanding cash flow better would allow them to plan ahead (53%) and would reduce their stress levels (46%)

• Were not too busy to learn (50%)

• Felt they could afford (financially) to learn cash flow (63%)

• Felt there was more to learn about ash flow (52%)

• Felt it was their job to understand cash flow management (87%)

Small business knowledge and confidence

When reflecting on the start-up phase of their business, the majority sought advice from their accountant (44%). The level of business, financial and cash flow management knowledge respondents reported during the start-up phase of their business showed that while some viewed their knowledge as poor or very poor, a roughly proportional number reported their knowledge as good or very good. Each aspect of management was closely mirrored in relation to knowledge during start-up. (It should be noted the majority of small businesses surveyed had been in business for more than 10 years and this may impact their recall of their knowledge of these areas during the start-up phase of their business).

In addition to knowledge, the research sought to understand small business owners’ confidence relating to a number of financial aspects including accessing business advisors and tax professionals, managing finances, using accounting software and being tax and superannuation compliant.

The data shows that 20% of respondents are not confident with accounting software, although 81% said they are confident their finances are well managed, suggesting they depend on other means of managing their finances.

Financial state and age of business

Participating small business owners were asked to describe the financial state of their business. Three quarters (75%) of respondents noted that their business was financially neutral to growing. This data was then compared to the age of business to determine any relationship, where it was found that age of business was not related to the reported financial state. In other words, some new businesses reported growth and, some mature businesses reported they were under financial pressure.

Within the 2016 study it was found businesses facing financial pressure also reported a lack of confidence in relation to tax and superannuation knowledge and experienced cash flow issues. Half of participating small business owners reported experiencing cash flow issues within this study. Common reasons thought to cause cash flow issues, according to small business owners and business advisors/ tax professionals, included the volume of sales, client payment delays and business expenses. Cash flow issues were not limited to businesses’ early operating years. Of the businesses that reported cash flow issues (n=234), a third reported that they experienced cash flow issues in the first year of operation and nearly half of the



businesses reported experiencing cash flow issues as established businesses being five years or older. This was in contrast to the views of business advisors and tax professionals who indicated businesses five years or younger were more likely to experience cash flow issues.

Although the majority of these businesses have been operating for 10 or more years they feel they have more to learn about cash flow. They are interested in learning and while the time and cost barriers are not as prominent as in the 2016 research, they were an issue for approximately half the participants.

Relationship with trusted advisors

Small business owners typically interact with their business advisor/ tax professional on a quarterly basis stating they trust them, use them for compliance, and believe the services offered are affordable. Small business owners did not identify any reasons inhibiting their interaction with advisors; however business advisors and tax professionals believe cost and time are inhibiting factors. When linking these findings to small business owners’ views on various aspects of cash flow, it was interesting to find that more than half believed having a better understanding of cash flow would enable forward planning and reduce stress level, but only 14% of business owners identify this as a service offered by their main provider of advice. This suggests an interest in better understanding their cash flow but a lack of awareness about the range of services offered by their advisor.

Small business owners prefer to seek knowledge and advice on financial management from their business advisor, accountant or bookkeeper (54%). Results from the 2016 study showed small businesses relied on their tax agent, accountant or other owners in business for advice on taxation and superannuation. Small businesses preferred methods of obtaining knowledge about business and cash flow management that were online-based, followed by face-to-face interactions.

Business advisors and tax professionals report assisting small business with cash flow issues through coaching and mentoring and encouraging clients to ask more questions.

Business advisors’ perceptions on cash flow issues

Business advisors (63%) surveyed feel most small businesses experience cash flow issues in the initial two years. They stated that causes are mostly payment delays (36%), expenses (32%), and volume of sales (25%). Forty two percent of small business respondents indicated issues in the initial two years, and 26% declared cash flow issues after five years of operation.

Most business advisors indicated that improved planning and management could resolve cash flow issues (61%). Other methods for solving cash flow problems identified by business advisors include improved payments from customers (28%), and reducing expenses (25%).

Most business advisors (71%) believe it’s very important for small businesses to improve their business knowledge and finance management. Business advisors play an active role in education mostly through coaching and mentoring (68%) and encouraging their clients to ask more questions (23%). Seventy nine percent believe small businesses prefer to go to their accountant or bookkeeper for advice on financial management. The qualitative research highlighted that tax professionals believe that small business owners often don’t realise they need advice and knowledge on cash flow management until a crisis point is reached, such as getting into debt or making a loss.



PROJECT AIM Indigenous Professional Services was engaged in February 2017 by the ATO to deliver the Small Business Cash flow Education Research project. The objectives and requirements underpinning the project were:

To provide a deeper understanding of what drives small business cash flow issues, how effectively they manage cash flow and its related issues and who helps them. In addition, the research aims to identify the broader financial management education needs of small businesses, with a focus on cash flow, when they need this education and how they want it.

Research Aims

• Identify small business perceptions of what influences and drives cash flow issues.

• Explore small business perspectives of cash flow issues, including potential solutions.

• Explore the tax professionals’ perspectives on cash flow issues.

• Explore in more depth the relationship and engagement between small business and their tax professionals and how behaviour towards cash flow management can be changed with intermediaries.

• To provide actionable information to help pre-empt small business needs in financial management, and provide prompts for businesses to access the right resources at the right time in their preferred ways.

• To provide a powerful evidence base to develop and implement the most effective education offering for small business.

• To provide a benchmark for future tracking research in this area.



METHODOLOGY Small businesses and tax professionals across Australia were surveyed to establish a current understanding of cash flow management and associated practices within small business to inform the broader financial management education needs of small businesses. Both qualitative and quantitative methods were utilised to provide a deeper understanding of what drives small business cash flow problems. The research explored how effectively small businesses manage cash flow and related issues and who they ask for help.

The structure, design and content of both the qualitative and quantitative surveys were developed by IPS in collaboration with the ATO’s Small Business Engagement and Support (SBES) project team and external stakeholders.

Definitions

Small Business: An active business that has an ABN and a turnover of less than $2,000,000. Please note that during the course of this research, the ATO’s definition of a small business changed to include businesses with less than $10 million aggregated turnover. To enable comparison to 2016 research, the definition for this research remained as an active business that has an ABN and a turnover of less than $2,000,000.

Business advisor: A person or entity that provides advice and / or services to small businesses including but not limited to taxation professionals, accountants, book keepers, BAS agents, business, financial and legal advisors.

Reader Guidelines

Please note that all quotes within this report are obtained from participant comments within the qualitative phase, unless otherwise referenced.

Sample

There were two phases of data collection. The first was in-depth qualitative interviews and the second was a broader quantitative phase. Within the two phases, two populations were targeted, small business owners and tax professionals. Participants were selected across Australia using a reliable commercial sample listing sourced from Q&A Marketing Research Pty Ltd.

Geographical quotas were set to ensure a representative sample was obtained.

There was diversity within the sample in terms of sector, education, length of operation, previous experience, number of employees and location.

Overview of the Research Design and Reporting Structure.

EngagementandScope

Collaborationwithinternalstakeholders

LiteratureReview

InstrumentDevelopment

Stage1:Discovery

QualitativeSurvey:development andexecution

n=31Smallbusinessownersandn=12businessadvisors

AnalyseandprepareToplinereport

PresentToplinereport

Stage2:Measurement

QuantitativeSurvey:developmnet andexecution

CATIinterviews:n=460Smallbusinessownersandn=150

businessadvisors

Stage3:AnalysisandReporting

Draftreport

Incorporatefeedbackintofinalreport

Submitfinalreport



Qualitative Research The qualitative interviews were designed to ascertain small businesses’ level of understanding in regards to cash flow management from the perspective of both small businesses and tax professionals. A total of 43 in-depth interviews were conducted in geographically diverse regions (both metropolitan and regional, Figure 4) in all states and territories across Australia except Tasmania and the ACT (Figure 6). Figure 5 provides a breakdown of tax professionals’ area of expertise.

Figure 4: Participants.

Small Business Tax professional Total (n)

TOTAL 31 12 43

Regional participants 13 4 17

Metro participants 18 (4 Indigenous) 8 (2 Indigenous) 26

Figure 5: Tax professional area of expertise.

Tax professional area of expertise (single response) Total (n)

Tax 3

Business advice 3

Bookkeeping 2

Accounting 2

Superannuation 1

Financial Management 1

Figure 6: Geographic range of interview participants.



Data Collection and Analysis

Two discussion guides were prepared and used to collect data – one for small businesses (Appendix 2) and one for tax professionals (Appendix 3). The discussion guides focused on a number of key areas designed to explore and provide a deeper understanding around cash flow management issues, including:

• Business and financial management experience, including understanding of cash flow.

• Relationships with tax professionals, accountants, tax advisors, small business groups, the ATO and other networks.

• Access and use of training and support mechanisms.

• Tools currently used to manage small business cash flow.

Thirty-four interviews were conducted face to face and nine were conducted by phone. While this could be considered a limitation, interviewers and researchers reported no loss of quality in data collection via phone interviews.

Each interview was transcribed and coded using NVivo, providing analysis of key themes emerging from the interviews. NVivo enabled content analysis to verify data expressed as themes, as analysed in the transcripts.

Quantitative Research Q&A Marketing Research Pty Ltd conducted recruitment of 150 tax professionals and 450 small business owner participants for the quantitative survey. Small businesses were sourced via a commercially purchased list. The small business sample was supplemented by a further 10 participants obtained from two lists provided by the ATO to increase the number of new businesses within the sample. All small business participants were owners or part owners of the business. Tax professionals were sourced using a list provided by the ATO. Participants were randomly selected from the lists via the Computer-Assisted Telephone Interviewing software (CATI) survey system. A total of 460 small businesses and 150 tax professionals across Australia participated (Figure 7). Quotas for the small businesses were set for each state to ensure an adequate representation in relation to ABS demographic data. Figure 8 provides a summary of tax professionals’ areas of expertise; multiple selections were permitted. Note that the small business sample represents survivors as the majority were established businesses 10 years or older. Also, tax professionals were considering their client base when responding.

Figure 7: Quantitative Participants.

Small Business Tax Professionals Total (n)

TOTAL 460 150 610

Regional participants 222 (5 Indigenous) 62

Metro participants 238 (3 Indigenous) 88



Figure 8: Tax professional areas of expertise.

Tax professional’s area of expertise (n=150, multiple selections) Total (n)

Tax 123

Accounting 68

Business advice 54

Bookkeeping 44

Preparation of financial reports 25

Superannuation 19

Strategic advice 15

Transactional advice 8

Payroll 2

BAS 2

Compliance 2

Real estate / property management 2

Auditing 1

Global financial crisis 1

Source: TP A3, n=150.

To ascertain small businesses’ level of understanding in regards to cash flow management, two quantitative surveys were designed. The first survey was for small businesses (Appendix 4) and the second was for tax professionals (Appendix 5).

After collaborative development of the surveys and prior to implementation, the surveys were piloted and IPS’s behavioural psychologist Dr Pauline Arnold undertook cognitive testing. Q&A Research then conducted the surveys via the CATI survey system. The small business survey took about 11 minutes to complete and the tax professionals survey took about 14 minutes to complete. The surveys were approved by the Australian Government Statistical Clearing House, approval number: 02548-01.



RESEARCH FINDINGS Small businesses and tax professionals across Australia were surveyed to establish their current understanding of cash flow management and associated practices within small business to inform the broader financial management education needs of small businesses.

Financial Knowledge During their start-up phase small business owners reported they sought advice from a number of different people and professions. Figure 9 shows the majority received advice from their accountant (41%) and around a third (36%) of small businesses reported setting up their business themselves without help. Advice from a family member was also sought by 21% and other small business owners were approached by 14% of respondents. It should be noted the majority of small businesses surveyed had been in business for more than 10 years and this may limit their recall of all advice sought at that time.

Figure 9: Where small businesses sought help during start up.

Source: SB B1 Thinking about when you first started your business, who helped you set up your business? (n=460, multiple selections permitted).

41%

36%

21%

14%

6%

5%

4%

4%

3%

2%

6%

6%

0

Accountant

I did it myself

Family Member

Other Small Business Owner

Lawyer / Soliciter

Industry Group

Bookkeeper

Mentor

Small Business Centre

BAS Agent

Other

Don't know

Prefer not to say



The level of knowledge respondents reported during the start-up phase of their business showed that while some viewed their knowledge as poor or very poor, a roughly proportional number reported their knowledge as good or very good (Figure 10). The figure shows each aspect of business management, financial management and cash flow management were closely mirrored. It should be noted the majority of small businesses surveyed had been in business for more than 10 years and this may impact their recall of their knowledge of these areas during the start-up phase of their business.

Figure 10: Small business owners self-reported knowledge.

Source: SB C8-C10 Thinking about when you first started in business, how would you rate your knowledge of the following, where 1 is very poor and 5 is very good also with the options of ‘not applicable’ and ‘unsure’? (n=460).

Small businesses were also asked to rate their ability now in relation to specific types of tasks which are a fundamental part of managing the financial affairs of a business (Figure 11). Generally, they rated their current abilities of the following as good or very good:

• Awareness of cash coming in and out (92%)

• Managing cash flow (95%)

• Managing invoicing (86%)

• Managing payments incoming (84%)

• Managing payments outgoing (93%)

Respondents did not rate their knowledge relating to forecasting their business finances highly, with 17% selecting poor or very poor and only 51% good or very good.

Small business owners highly rate their ability to do the fundamental activities such as cash in and out, invoicing and outgoing payments.

13%

9%

10%

23%

19%

16%

31%

35%

31%

18%

23%

27%

14%

12%

14%

1%

1%

1%

0

1%

1%

Business management knowledge

Financial management knowledge

Cash flow management knowledge

1 Very Poor 2 3 Neither 4 5 Very Good Not Applicable Don't know / Unsure



Figure 11: Small business owners’ self-reported ability.

Source: SB C11-C16 How would you rate your ability now, in relation to the following, on a scale of 1 to 5, where 1 is very poor and 5 is very good also with the options of ‘not applicable’ and ‘unsure? (n=460).

To gain a deeper understanding of how small business owners feel regarding the finances of their business, respondents were asked specific questions relating to their knowledge and confidence of various financial aspects using a scale type response (Figure 12). The data shows most small business owners are confident their business is tax and superannuation compliant (94%) and the majority know how and where to get advice relating to tax and superannuation (81%). Interestingly, the data shows some respondents (20%) are not confident with accounting software although most said their finances are well managed, suggesting they depend on other means of management.

1%

0

0

0

0

5%

1%

1%

2%

1%

2%

8%

12%

7%

8%

7%

11%

29%

40%

27%

25%

27%

28%

29%

45%

64%

60%

63%

53%

18%

0

1%

5%

2%

6%

7%

1%

0

0

0

0

4%

Managing cash flow

Awareness of cash coming in /out

Managing invoicing

Managing payments (outgoing)

Managing payments (incoming)

Forecasting (business finances)

1 Very Poor 2 3 Neither 4 5 Very Good Not Applicable Don't know / Unsure



Figure 12: Small business owners’ self-reported knowledge and confidence.

Source: SB B13-B19 For each can you rate how well it describes you as a business owner / manager. A rating of 1 indicates that the statement does not describe you at all. A rating of 5 indicates that the statement describes you very well also with the options of ‘not applicable’ and ‘unsure’? (n=460).

7%

7%

1%

14%

4%

7%

1%

7%

11%

4%

4%

4%

5%

1%

23%

29%

13%

14%

11%

24%

4%

24%

26%

31%

24%

28%

29%

18%

35%

27%

50%

38%

52%

33%

75%

3%

0

0

6%

1%

2%

1%

1%

0

0

0

0

0

0

I am good at accessing and using professionals like accountants, tax agents and business

advisors for my business

I have a good understanding of bookkeeping / accounting

I am confident that my business finances are being well managed

I am confident using accounting software to manage my business

I know how and where to get information for my business tax and super needs as it changes or

grows

I understand how tax and super works and feel equipped to manage these areas of my

business

I am confident by business is tax and super compliant

1 Poor match 2 3 4 5 Perfect match Not Applicable Don't know / unsure



Advisors to Small Business Small business owners were then asked who provided them with professional advice for their business (Figure 13). Nearly half (49%) noted their accountant and 38% said they did not ask anyone for advice.

In the New Small Business Education Research (2016), 80% of the new businesses said their main provider of advice was tax agents and accountants. The more established small businesses surveyed in this research were seeking professional advice less, with 49% likely to use an accountant.

Figure 13: Who small business owners seek advice from.

Source: SB B3 Who is the main provider of professional advice for your business? (n=460).

Responses from small businesses during the qualitative phase of the research indicated they obtained advice from a range of other sources, including industry groups, family, informal networks online sources and through social media including Facebook.

Do you use any informal networks for business information and advice?

I’ve been to the Small Business Advisory Centre for special networking events.

I’ve contacted Supply Nation about courses.

Have you ever called the ATO for advice?

No, I haven’t thought of them as a resource.

Yes, I have, but it takes a long time to get through when you ring the 1800 number.

Who are you likely to seek advice from?

I think I would go to the ATO, possibly call an accountant

Small businesses were asked where they go for information or advice relating to financial management. The majority of the small businesses surveyed (82%) stated they would contact their professional financial advisor, 8% said they would look for online resources and 5% would contact their industry association or body. Five percent would consult family or friends, 3% mentioned they would contact the ATO, 2% would talk to another business in their sector and 1% would contact a government agency (local, state, federal).

49%

2%

3%

1%

1%

1%

38%

4%

1%

Accountant

Bookkeeper

Business Advisor

Financial Advisor

BAS Agent

Legal Advisor

No One

Other

Prefer not to say



The small businesses surveyed were asked about the people or organisations they relied on for advice about tax and superannuation (Figure 14). Tax agents and accountants are relied on always or sometimes by the majority of the small businesses surveyed (71%). Around a third relied always or sometimes on a bookkeeper (32%) or other owners in their business (28%). The least relied on included other business owners (15%), government departments (16%) and business advisors, coaches or mentors (16%).

Figure 14: Who small business owners rely on for advice regarding tax and superannuation.

Source: SB B2 For each person or organisation, please indicate on a score of 1 to 5, where 1 is never rely on them for advice and 5 is always rely on them for advice, about tax and superannuation also with the options of ‘not applicable’ and ‘unsure’? (n=460). Note: each respondent provided an answer for each person or organisation.

8%

23%

39%

50%

48%

37%

48%

55%

36%

8%

4%

6%

7%

13%

15%

14%

14%

19%

12%

9%

13%

13%

18%

17%

16%

13%

25%

24%

6%

13%

9%

7%

7%

10%

8%

12%

47%

22%

19%

8%

8%

8%

7%

7%

4%

1%

36%

10%

13%

6%

16%

4%

3%

4%

0

0

0

0

0

0

1%

0

0

Tax Agent / Accountant

Other Owners in your Business

Bookkeeper

Business Advisor, Coach or Mentor

Friends or Family Members

Employee within Business

Associations

Government Department

Other Business Owners

1 Never Rely On 2 3 4 5 Always Rely On Not Applicable Don’t know / unsure



Given that small businesses identified they sought financial advice from tax professionals, particularly tax agents and accountants, they were then asked how often they interacted with their main provider of professional advice (Figure 15). The data shows small business owners typically interact with their main provider either monthly or quarterly, accounting for 59% of respondents.

Figure 16 shows how often the tax professionals surveyed reported interacting with their clients and while there are subtle differences, tax professionals also indicated interaction predominantly occurred on a monthly or quarterly basis.

Figure 15: How often small businesses interact with their main provider of advice.

Source: SB B4 Thinking about your main provider of professional advice for your business, how often would you interact with this advisor? (n=282).

Figure 16: How often tax professionals report interacting with their small business clients.

Source: TP C1 On average, how often do you your small business clients interact with you? (n=150).

4%

8%

30%

28%

7%

10%

5%

4%

3%

1%

Once a year

Twice a year

Quarterly

Monthly

Fortnightly

Weekly

Continuous Communication

As needed

Other

Unsure

1%

9%

40%

17%

5%

6%

7%

15%

0

1%

Once a year

Twice a year

Quarterly

Monthly

Fortnightly

Weekly

Continuous Communication

As needed

Other

Unsure



Small businesses were asked what services their main provider of professional services provided. Figure 17 shows the majority of services small business owners report as being provided by their main professional advisor include tax obligations (57%), tax information (48%) and financial management (33%). Only 12% identified that their advisor offered assistance with business strategy and 9% identified cash flow. Only 2% identified that their provider offered services relating to pricing strategies. This is concerning as incorrect pricing strategies are potentially one of the drivers for cash flow issues.

Tax professionals were asked what services they provide to small business (source TP C4, n=150). Tax obligations (85%) and tax information (75%) were the main services provided and is consistent with the views of small businesses. Other services provided by tax professionals included cash flow management (38%), dealing with government regulators (35%), financial management (33%), business strategy and planning (31%) and system set up and maintenance (28%). While there are some differences in representation between tax professionals and small businesses, small business views of the services offered by their provider are reasonably consistent with the services identified by tax professionals. With regard to cash flow however, 38% of tax professionals identified it as a service, however, only 14% of small business owners identified it as a service offered.

Figure 17: Services small business owners identified as offered by their main provider.

Source: SB B6: What services does your main provider of professional advice for your business provide? (n=282). Note: all respondents responded either ‘yes’ or ‘no’ to each service.

To further explore small business engagement with their main provider of professional advice, more specific questions were asked using a scaled response. Figure 18 shows that of the small businesses surveyed, the majority agree or strongly agree that they trust their business advisor’s advice (95%) and use their business advisor for compliance (90%). The data also shows the majority of small business owners believe their business advisors understand their business (92%) and are affordable (77%). Respondents were less likely to agree or strongly agree that they use their main provider of professional advice for planning (53%) or cash flow issues (37%).

78%

57%

33%

23%

20%

14%

10%

9%

3%

2%

2%

1%

0

0

0

Tax Obligations

Tax Information

Financial Management

Dealing with Government / Regulators

Business Strategy / Planning

Cash Flow Management

Staff Related Advice

System Set Up

Pricing Strategies

Research and Development

Marketing

Don’t know

Exit Strategy

Prefer not to say

Other



Figure 18: Small business owners’ responses to a serious of questions relating to their business advisors.

Source: SB B7-B12 I am going to read a series of statements and I would like you to rate your response on a scale of 1 – 5, where 1 is strongly disagree and 5 is strongly agree also with the options of ‘not applicable’ and ‘unsure’ (n=282). Note each participant provided an answer for each statement.

0

1%

1%

4%

8%

22%

1%

2%

1%

5%

16%

23%

3%

6%

6%

13%

22%

15%

20%

18%

28%

21%

20%

14%

75%

72%

64%

54%

33%

23%

1%

1%

0

3%

1%

2%

0

0

0

0

0

1%

I trust my advisor's advice

I use my advisor for compliance

My advisor understands my business

I can afford my advisor's advice

I use my advisor for planning

I use my advisor to plan cash flow strategies

Strongly Disagree 2 Neither 4 Strongly Agree Not applicable Don't know / unsure



Figure 19 shows the majority of business owners said there was nothing (75%) preventing them from interacting with their main provider of professional advice, suggesting they believe they interact with their advisors when necessary. Cost (14%) and time (8%) were identified as reasons by only a small number of small businesses.

Figure 19: Reasons small business owners don’t interact with their advisor.

Source: SB B5 What is the main reason, if any, that prevent you from interacting with your main provider of professional advice for your business as often as you’d like to need to? (n=282).

In contrast to the small businesses, tax professionals believe that cost (41%) and time (33%) are major reasons why clients do not interact with them as often as they should (Figure 20).

Figure 20: Tax professionals’ reasons why small business owners don’t interact with their advisors as often as they should.

Source: TP C3 What do you believe is the main reason that prevents your clients interacting with you as often as they should? (n=63).

75%

14%

8%

1%

0

0

1%

1%

0

No reason

Cost

Time

Unsure of their services

They don't understand my business

Not offering value for money

Other

Unsure

Prefer not to say

41%

33%

6%

10%

8%

2%

0

Cost

Time

Not knowing the services we offer

Don't want my advice

Other

I don't know

Prefer not to say



Small Business Financial State and Cash flow With a solid understanding of whom small business owners seek information from in relation to business and finance management, it became important to understand how they viewed the financial state of their business, particularly cash flow. Respondents were asked to rate the financial state of their business right now (Figure 21) using a scale from one ‘under pressure’ through to five ‘growing strongly’. Forty percent of respondents rated their businesses’ financial state as four to five (growing strongly). Twenty-five percent identified they felt they were under financial pressure (1 or 2 on the ratings scale). Approximately one third gave a rating of ‘three’.

Figure 21: Small business views of the financial state of their business.

Source: SB C1 On a scale of 1 to 5, how would you describe the financial state of your business right now, with 1 being under pressure and 5 growing strongly also with the options of ‘not applicable’ and ‘unsure’ (n=460).

12%

13%

35%

24%

16%

0

0

Under Pressure 1

2

3

4

Growing Strongly 5

Not applicable

Unsure



Figure 22 shows the age of business compared to their reported financial state. The data shows a relatively even spread of businesses across each category regardless of age. The exception to this is businesses aged 21 years or more which have greater percentage within the steady or growing categories.

Figure 22: Age of business and self-reported financial state.

Source: SB A6 How long has your main business been in operation? and SB C1 On a scale of 1 to 5, how would you describe the financial state of your business right now, with 1 being under pressure and 5 growing also with the options of ‘not applicable’ and ‘unsure’? (n=460).

Figure 23 compares the self-reported financial state of small business ‘right now’ and business owners’ self-reported ability to managing cash flow. The data shows businesses who reported a three, four or five in relation to their financial state are also those who believe they have ‘good’ or ‘very good’ ability to manage cash flow.

Figure 23: Small business current financial state and their ability to manage cash flow.

Source: SB C1 On a scale of 1 to 5, how would you describe the financial state of your business right now, with 1 being under pressure and 5 growing also with the options of ‘not applicable’ and ‘unsure’ and C11 How would you rate your ability now, in relation to the following, on a scale from 1 to 5, where 1 is very poor and 5 is very good, also with the options of ‘not applicable’ and ‘unsure’? (n=460) Note there were zero responses within the ‘very poor’, ‘poor’, ‘not applicable’ or ‘unsure’ options.

2%

1%

3%

5%

1%

1%

4%

6%

3%

4%

8%

18%

8%

3%

7%

10%

1%

2%

3%

10%

5 years or less

6 - 10 years

11 - 20 years

21 years or more

1 Under Presure 2 3 4 5 Growing Strongly Not applicable Unsure

3%

3%

6%

4%

5%

18%

11%

3%

4%

4%

13%

13%

13%

1 Under Presure

2

3

4

5 StronglyGrowing

Very Poor Poor Neither Good Very Good Not applicable Unsure



Small Business Cash flow Perspectives

Small businesses who participated in the survey understand cash flow is important. Ninety-four percent said they kept track of their cash flow (source SB C2). When asked how much time they spent managing their cash flow 95% of businesses surveyed said they manage their cash flow weekly or daily. The following figure (24) shows how often small businesses report managing their cash flow.

Figure 24: How often small businesses manage their cash flow.

Source: SB C17 On average how much time (hours) do you spend managing your cash flow (per day, week, fortnight, month, quarter)? (n=460).

A summary of how often small business owners manage their cash flow is shown in figure 25.

Figure 25: Summary of how often small business owners manage their cash flow.

Source: SB C17 (n=460).

0

2

4

6

8

10

12

14

Day Week Fortnight Month Quarter Don't know Prefer not to say

Perc

enta

ge o

f Sm

all B

usin

esse

s

0 1 2 3 4 5 6-10 hours 11 - 20 hours 21 hours + Don't know Prefer not to say

29%

66%

0

1%

0

3%

1%

Day

Week

Fortnight

Month

Quarter

Don't know

Prefer not to say



Small business owners were asked if their business had ever experienced cash flow issues (SB source C3, n=460). Fifty-one percent of participants said they had experienced cash flow issues. Small businesses reported that cash flow issues usually arose in the first two years of operations or after five years of operations. Figure 26 shows the responses for small businesses and Figure 27 shows responses for tax professionals regarding how soon after starting do small businesses typically start having cash flow problems. The data shows that tax professionals (63%) believed that the majority of small businesses have issues in the first two years of operation.

Figure 26: When do small businesses start having cash flow issues?

Source: SB C4 How soon after starting your business did cash flow issues arise? (n=234)

Figure 27: Tax professionals’ observations of when businesses experience cash flow issues.

Source: TP B2 From your observations, for those clients who have cash flow issues, how soon after starting in business to they typically start having problems? (n=150).

The qualitative research found tax professionals believe small business owners realise they need assistance or training with cash flow management at points of crisis.

“When they realise they don’t have cash”

“When they make a loss”

“When they get themselves into debt”

30%

12%

17%

26%

15%

0

Less than 1 year

12 months - Less than 2 years

2 years - 5 years

5 years +

Don't know

Prefer not to say

35%

28%

17%

8%

13%

0

Less than 1 year

12 months - Less than 2 years

2 years - 5 years

5 years +

Don't know

Prefer not to say



The typical causes of cash flow issues were identified by small businesses as volume of sales (47%), payment delays (26%) and expenses (23%) (Figure 28). This was consistent with tax professionals who also identified those three factors as the primary causes of cash flow issues (Figure 29). Further research into this could focus on whether small business owners connect pricing strategies to volume of sales and the subsequent impact on cash flow.

Figure 28: Typical causes of cash flow issues as identified by small businesses.

Source: SB C5: What were the causes of cash flow issues? (n=234) Note: respondents were asked whether or not each issue caused cash flow issues.

Figure 29: Typical cash flow issues as identified by tax professionals.

Source: TP B4 What do you believe are the typical causes of cash flow issues for your small business clients? (n=150) Note: respondents were asked whether or not each issue caused cash flow issues.

47%

26%

23%

7%

6%

5%

3%

8%

3%

0%

Volume of sales

Payment delays

Expenses

Staff costs

Money tied up in assets

Paying for stock / supplies

Pricing

Other

Don't know

Prefer not to say

36%

32%

25%

10%

10%

9%

9%

25%

0

0

Payment delays

Expenses

Volume of sales

Money tied up in assets

Pricing

Staff costs

Paying for stock / supplies

Other

Don't know

Prefer not to say



Analysis of the ‘other’ responses thought to cause cash flow issues (source SB C5), given by small businesses, included a downturn in the economy (34%), personal circumstances (11%), a change in the business (9%) and tax or superannuation obligations (6%). The remaining respondents who experienced cash flow issues could not identify a specific reason. Tax professionals’ ‘other’ responses included a lack of planning, GST, finance availability and a lack of knowledge (source TP B4).

The small business respondents who identified having had cash flow issues were asked what actions they took at the time to resolve the issue (Figure 30). Figure 31 shows tax professionals’ responses when asked what advice they typically give to small businesses to help them better manage their cash flow.

Figure 30: Actions taken by small businesses to resolve cash flow issues.

Source: SB C7 What actions did you take to help resolve cash flow issues? (n=234)

Figure 31: Advice tax professionals give to small businesses to better manage their cash flow.

Source: TP B5 What advice did you typically give to clients to help them better manager their cash flow? (n=150).

21%

18%

18%

17%

13%

12%

7%

7%

6%

2%

8%

9%

1%

Improved planning / management

Expanded volume of work

Reduced expenses

Borrowed money

Efficiencies in staffing costs

Improved payments from customers

Reduced or deferred costs for stock or supply

Reduced costs for business equipment

Pricing

Made an exit plan

Other

Unsure

Prefer not to say

61%28%

25%9%9%

7%7%7%

6%1%

3%0

2%

Improved planning / managementImproved payments from customers

Reduced expensesEfficiencies in staffing costs

Reduced or deferred costs for stock or supplyReduced costs for business equipment

PricingBorrowed money

Expanded volume of workMade an exit plan

OtherUnsure

Prefer not to say



The data shows tax professionals believe the major issue for small business is their lack of planning or management (61%). Small business responses show they use a variety of actions to resolve their cash flow. The range of actions and the relatively even spread across the top six responses means there a variety of levers available to small businesses to resolve cash flow issues. However, it is unclear how aware small businesses are regarding these options. This provides the ATO with an opportunity to develop an education strategy to communicate the variety of options available to assist with cash flow management.

Cash Flow Tools

The cash flow tools reported by small businesses (Figure 32) included software or web based accounting tools (50%), online banking (17%), pen and paper methods (13%) and Excel spread sheets (10%). The tools recommended to small businesses by tax professionals (Figure 33) were predominantly software or web based accounting tools (59%) and Excel spread sheets (26%).

Around three quarters (77%) of small businesses surveyed use web based tools. Given the majority have been in business for over 10 years, this suggests that small businesses are adaptive as most of the tools have only become widely available in the last 5-10 years. The qualitative research also supported this notion.

“So in say the last three years we moved to XERO, it’s a cloud based accountancy program, it’s fantastic, it does reporting, so we know our position with the ATO, what we have coming in, coming out, live bank feeds everything so it gives you a really good reporting in that respect.”

Figure 32: Cash flow tool used by small businesses.

Source: SB C18 What is the main tool (if any) that is used to track cash flow? (n=460).

50%

1%

10%

17%

13%

1%

8%

0%

Software or web based accounting tool

Industry based cash flow tool

Excel / spreadsheet

Online banking information

Pen and paper methods

Other

None

Perfer not to say



Figure 33: Cash flow tools recommended by tax professionals to their entire small business client base.

Source: TP B16 What is the main tool you recommend clients use to manage their cash flow? (n=150).

The use of pen and paper methods (13%), Excel and spread sheets (10%) was notable within small business respondents (Figure 32). It may be business advisors are using Excel as a stepping stone to assist small businesses transition towards web based tools.

Given the preference for software or web based accounting tools, both small business owners and tax professionals were asked whether the reports generated by software programs were easily understood and helpful in managing cash flow. Small business responses to the scaled question is shown in Figure 34. The majority of small businesses stated the reports helped them understand cash flow (77%). Twenty-six percent of tax professionals believe their clients are capable of understanding the report in relation to cash flow management (Figure 35). Further research could explore the level of understanding of reports.

Figure 34: The reports generated by software programs are helpful in managing cash flow as perceived by small businesses.

Source: SB C19 On a scale of 1 to 5, where 1 is strongly disagree and 5 is strongly agree, are the reports generated by your software of web-based systems helpful in understanding cash flow? (n=355)

59%

26%

3%

2%

1%

5%

2%

2%


Excel / spreadsheet




Other

None

Perfer not to say

2%

4%

14%

32%

41%

6%

1%

Strongly Disagree 1

2

Neither 3

4

Strongly Agree 5

Not applicable

Don't know / unsure



Figure 35: The reports generated by software programs are helpful to small businesses in managing cash flow as perceived by tax professionals.

Source: TP B17 On a scale from 1 to 5 where 1 is strongly disagree and 5 is strongly agree, do the majority of your clients understand the reports generated by their software? (n=150).

The qualitative research found when small businesses were asked to consider their preferred cash flow management tool in an ‘ideal world’, online options were very popular.

“Online so you could access it so you had the question you needed answered.”

“I think online support with a real person you can talk to is the best thing.”

“Online is usually best, I can access it from anywhere.”

4%

29%

38%

22%

3%

0

4%

Strongly Disagree 1

2

Neither 3

4

Strongly Agree 5

Not applicable

Don't know / unsure



Figure 36 shows while there are subtle differences between age groups for each tool, the age of business does not account for the popularity of these cash flow management tools. For instance, 10% of the youngest and oldest business categories each use Excel or spreadsheet.

Figure 36: Age of business and cash flow management tool used.

Source: SB A6 How long has your main business been in operation? and C18 What is the main tool (if any) that you use to track your cash flow? (n=460) Note: each age group total represents 100%.

40%

10%

10%

10%

0

10%

20%

42%

17%

8%

8%

0

8%

17%

51%

14%

14%

7%

0

7%

7%

44%

18%

14%

10%

2%

8%

4%




Excel / spreadsheet


None

Other

5 years or less 6 - 10 years 11 - 20 years 21 years or more



The qualitative research offered further insight into the support and education small business owners thought most useful for managing their cash flow.

“If the ATO could offer small business owners some kind of program that would be something I would be willing to look at, whatever is on offer.”

“If there are services that are already on offer that are free, they should be advertised more.”

“One on one support from the ATO or small business centre saying these are the things to look out for and some of the options available to you.”

“I would like to attend more ATO sessions, I just never know when they’re on.”

“I know the ATO hold workshops for new business owners. I think a tool that is easy to use, with training and support on how to use it would be really good.”

“A portal or website, a small business part that outlines in laymen’s terms, plain English that everyone can understand.”

“It would be good for the ATO to send links to a business when they register, with the local options for assistance.”

Small business owners responded positively towards seeking help and advice from the ATO within the qualitative survey. Many were aware the ATO offered workshops and other resources, whereas others highlighted the need for more awareness of ATO offerings. From some comments it would seem a beneficial process for the ATO to offer various services directly to small businesses and increase awareness of what is already on offer as a way of building positive relationships between small businesses and the ATO.

Developing Business and Financial Knowledge Sixty percent of small businesses believe it is important or very important to improve their knowledge about business management, while 17% didn’t think it was important (Figure 37). Figure 38 shows tax professionals (94%) believe knowledge improvement is important or very important, regardless of the age of a business.

Figure 37: View of small businesses improving knowledge about business management.

Source: SB D1 On a scale of 1 to 5, with 1 being not at all important and 5 being very important, how important is it to improve your own knowledge about business management and financial management right now? (n=460)

9%

7%

23%

20%

40%

0%

1%

Not Important 1

2

3

4

Very Important 5

Not applicable

Don't know / unsure



Figure 38: Tax professionals’ view regarding the importance for small businesses improving their knowledge about business management.

Source: TP D1 On a scale of 1 to 5, where 1 is not at all important and 5 is very important, how important is it for businesses to improve their knowledge of business and financial management? (n=150).

Small business respondents that selected a four or five (n=272) were asked why they believed it was important to improve their knowledge. Forty-six percent claimed they wanted to be better informed, 42% wanted to be more in control of their business, 9% wanted to save money and be able to do it themselves and the remaining 3% did not offer an answer.

Small business respondents who selected one or two (n=74) were asked why they didn’t rate improving their knowledge as important. The most common responses were; participants already felt competent with business knowledge and financial management (40%), it wasn’t important to them (34%), they were not interested in learning this aspect of the business (18%) or they had an employee who managed those areas (5%). The remaining 3% did not give an answer.

Small business respondents were then asked specific questions relating to cash flow, their knowledge, application and perceived barriers to improving their understanding. Figure 39 shows most small business owners clearly identify that cash flow management is part of their job (87%). More than half are interested in improving their cash flow management (58%) and felt they had more to learn about cash flow (52%) even though the majority of the sample have been in business for more than 11 years.

Fifty-three percent believe having a better understanding of cash flow would be beneficial to planning and reducing stress (46%) with 50% indicating they were not too busy to learn about cash flow and 63% say they could afford (financially) to learn about cash flow. These results do not support time and cost as potential barriers to learning as identified in the qualitative research. The majority of businesses in the quantitative research have been in business for greater than 10 years but feel they could further their knowledge on cash flow. They want to learn more and are willing to put time and money into this. The data suggests most small business owners would be receptive to improving their knowledge about cash flow and this provides the ATO with an opportunity to develop education for small businesses of all ages.

0

1%

5%

23%

71%

0

0

Not Important 1

2

3

4

Very Important 5

Not applicable

Don't know / unsure



Figure 39: Small business and cash flow.

Source: SB D4-D10 On a scale of 1 to 5, to what extent do you agree or disagree with the following statements, where 1 is strongly disagree and 5 is strongly agree also with the options of ‘not applicable’ and ‘unsure’? (n=460).

38%

25%

9%

14%

31%

22%

55%

20%

24%

16%

18%

30%

29%

30%

17%

22%

22%

19%

15%

16%

8%

11%

19%

28%

23%

11%

17%

3%

14%

9%

21%

22%

5%

14%

3%

1%

3%

3%

4%

2%

1%

1%

1%

4%

I am not interested in improving my cash flow

I'm too busy to learn about cash flow

Having a better understanding of cash flow would allow me to plan ahead

Having a better understanding of cash flow would reduce my stress levels

I can't afford to learn about cash flow management

I know all I need to know about cash flow

It's not my job to understand cash flow management

1 Strongly disagree 2 Disagree 3 Neither 4 Agree 5 Strongly agree Not applicable Don't know / unsure



Given both small businesses and business advisers identify the need for improved small business knowledge, establishing the best delivery source and format is essential to the development and implementation of successful education. Tax professionals and small business owners were asked what their most preferred source for information or training was, and where small business owners go for financial management advice and training. Figure 40 shows an accountant/ bookkeeper as the preferred primary source identified by 54% of small businesses and 79% of tax professionals (Figure 41).

Figure 40: Preferred source for information and training by small businesses.

Source: SB D24 What would be your most preferred source for obtaining cash flow and financial management information or training? (n=460).

Figure 41: Tax professionals’ view of small business’ preferred sources for obtaining cash flow and financial management information or training.

Source: TP D10 In your opinion, what would be your client’s top two most preferred sources for obtaining cash flow and financial management information or training? (n=150).

54%

6%

6%

5%

3%

2%

14%

9%

1%

Accountant / Bookkeeper

Industry body or association

ATO

Private training

Other government department

Business support organisation

Other (online)

Don’t know

Prefer not to say

79%

13%

10%

3%

3%

1%

50%

5%

1%

Accountant / Bookkeeper

Private training

Industry body or association

ATO

Business support organisation

Other government department

Other (online)

Don’t know

Prefer not to say



To see if tax professionals are addressing the present needs of small business in relation to financial advice, they were asked how they helped small business owners develop their knowledge of cash flow. Figure 42 shows tax professionals take an active role in education via coaching/ mentoring, and encouraging business owners to engage and ask more questions

Figure 42: How tax professionals assist small business.

Source: TP D2 How do you currently assist small businesses to increase their knowledge of cash flow? (n=150) Note: respondents said ’yes’ or ‘no’ to each option.

The diversity of small business industries coupled with the various platforms available for education and individual learning preferences, highlights the importance of offering a variety of education formats. Small businesses are not homogenous and have a variety of learning styles. This view was supported by small business within the qualitative data.

“I think that people learn in all different ways and that having a variety of options is equally important. Online people can do it whenever they want, like early morning, late at night, in their lunch break, whatever. Some people just like that and other people like that face to face. For it to be effective it has to be offered in a variety of formats.”

To determine the best platforms for education, small businesses were asked their preferred method of obtaining knowledge about business and cash flow management (multiple selections were permitted). Figure 43 shows online-based options were most preferred, followed by face-to-face interactions, with phone consultations being the least preferred option.

68%

62%

23%

5%

5%

3%

3%

3%

1%

0

0

0

8%

6%

1%

Coach and mentor

Offer suggestions

Encourage them to ask more questions

Refer to Accounting software help page / tutorial

Refer to training course

Refer to ATO website

Refer to industry groups

Refer to ATO education product

Via our business Facebook or Webpage

Refer to YouTube clips

Via Linkedin

Refer to Facebook groups

I do not seek to increase small business knowledge of cash flow

Other

Prefer not to say



Figure 43: Most preferred method of obtaining knowledge.

Source: SB D12-D22 On a scale of 1 to 5, where 1 is least preferred and 5 is most preferred, please indicate your preferred method of building your business and financial management knowledge, including tax and superannuation (n=460).

The primary reasons business owners wanted to improve their knowledge was to be better informed and to be more in control of their business. The preferred method for small businesses to receive information on business and financial management revolved around online channels, such as emails and tools/calculators on a websites. The preferred method for small businesses to receive education that builds their business and financial knowledge was online, training and face to face/ ’live’ formats.

In conclusion, this research has added to the foundation built by prior research. In 2016 it was found small businesses were motivated to learn and preferred to gain knowledge from their accountant or business advisor, a finding consistent with this research. The preferred method of delivery was also constant with online courses and face-to-face training being most favoured. The in-depth exploration of cash flow within small business coupled with a more comprehensive look at the relationship between small business and their advisors provides the ATO with further opportunities to develop tailored education products. With this breadth and depth of understanding the ATO is well positioned to trial new products and conduct follow up research to track changes in attitude, knowledge and financial management.

16%

23%

17%

28%

33%

28%

24%

34%

30%

28%

45%

9%

8%

9%

10%

11%

10%

15%

15%

14%

17%

17%

23%

21%

28%

20%

19%

25%

24%

22%

25%

24%

19%

25%

23%

24%

20%

15%

18%

20%

12%

15%

18%

10%

24%

21%

19%

18%

17%

16%

13%

13%

12%

10%

7%

Emails

Online tools, checklists, calculators

Websites

Online training (anytime)

Short face to face seminars

Face to face group courses

Case studies and examples

Live webinars

Networking events

Books or manuals

Phone consultation

1 Least preferred 2 3 4 5 Most preferred Not applicable Don't know / unsure



APPENDICES

APPENDIX 1: DEMOGRAPHICS The geographical spread of participating small businesses is summarised in Figure 44. The sample reflects the predetermined quotas to ensure each state was adequately represented in accordance to ABS demographic data. New South Wales, Victoria and Queensland account for the majority (72%) of surveyed businesses.

Figure 44: Where is your main business located?

Source: SB SQ2 Where is your main business location? (n=460).

Age of Small Business Businesses surveyed ranged in age from less than one year to more than twenty-one years (Figure 45). The majority of participating businesses (78%) in the sample had been operating for eleven years or more. Nine businesses (2%) within the sample were less than one year old and 10% in total were five years old or less. This sample of mainly older businesses allows us to draw significant insights from their survivor stories which are valuable to understanding the segment, and learning from their stories to provide insights for new businesses.

Figure 45: Age of small business.

Source: SB A6 How long has your main business been in operation? (n=460).

30%

24%

18%

12%

8%

4%

3%

1%

NSW

VIC

QLD

WA

SA

ACT

TAS

NT

2%

4%

4%

12%

26%

52%

Less than 1 year

1-2 years

3-5 years

6-10 years

11-20 years

21+ years



Business Life Stage Participating businesses were asked to describe the current stage of their business. Table 1 shows the age of small businesses compared to how they describe the current stage of their business. Five percent of businesses were in their early, start-up phase and 68% were established businesses. Fourteen percent described their business as about to go through a major change such as expanding, downsizing or changing direction. The remaining 13% said that they were considering exiting the business.

Table 1: Age of business and their reported stage of business.

Start-up phase

Established Going through a major change

Considering exiting the business

Don’t know / unsure

Business Age 5% 68% 14% 13% >1%

Less than 1 year 5 3 0 0 0

1 – 2 years 14 5 0 0 0

3 – 5 years 4 10 3 0 1

6 – 10 years 0 42 8 6 0

11 – 20 years 1 86 15 16 1

21 + years 1 163 37 37 0

Source: SB A6 How long has your main business been in operation? and A7 Which of the following best represents the stage your main business is currently in? (n=460).

Businesses less than one-year-old and one to two years old were either in their start-up phase or viewed as established. A small number of businesses aged three to five years were noted as going through a major change but none were noted as being under consideration for exit. No businesses aged six to ten years were identified as being in the start-up phase, with most being established and some going through a major change. This is the first age group where a proportion of business owners reported they were considering exiting the business. Businesses aged 21 years and more were mostly reported as established with a proportion undergoing change and a similar number of business owners reported that they were considering exiting the business.

Number of Employees within each Small Business Small business participants were asked how many employees worked within the business, not including contractors, voluntary staff or the business owner. Figure 46 shows the results; please note that owner operator businesses are represented by the ‘0’ employees result of 15%.



Figure 46: Number of employees within the small business.

Source: SB A3 How many people are currently employed in your business, not including contractors, volunteer staff or yourself? (n=460).

Annual Turnover of Small Business Eighty-three percent of the 460 businesses surveyed had an annual turnover greater than $75,000, and 17% had an annual turnover of $75,000 or less (Figure 47). This is in contrast to the 2016 research which saw 93% of small businesses recording an annual turnover of less than $75,000. It is likely the age of businesses played a part in this finding. Businesses aged five years or less accounted for 10% of the sample for this research. Of those small businesses (n=45), 42% reported a turnover of $75,000 or less and 58% reported a turnover greater than $75,000 (Figure 47).

Figure 47: Annual Turnover of Participating Small Businesses.

Source: SB SQ1 What was your approximate turnover for the financial year 2015 - 2016? (n=460).

15%

13%

12%

12%

9%

9%

8%

5%

5%

2%

2%

8%

0

0

1

2

3

4

5

6

7

8

9

10

11 or more

Prefer not to say

Num

ber o

f Em

ploy

ees

17% 83%

0% 20% 40% 60% 80% 100%

Under $75,000 Between $75,000 and $2 million



Education Level The education level of small business owners surveyed showed the majority (67%) had either completed senior school or a certificate/ trade qualification (Figure 48).

Figure 48: Small business participants’ highest level of education.

Source: SB A5 What is the highest level of education you have achieved? (n=460).

Business Ownership and Experience Small businesses surveyed were asked if their current business was their first business. Sixty-seven percent stated it was their first business and the remaining 33% had owned business/es prior to their current business.

Small businesses surveyed were found to have a range of experience owning a small business (Figure 49). Of the respondents, 15% had five years or less experience. Fifteen percent had six to ten years of experience, 25% had 11 - 20 years, 41% had 21years or more experience owning a small business and 4% preferred not to say.

Figure 49: Years as a small business owner.

Source: SB A9 How many years have you been a small business owner, not just in your current business? (n=460).

17%

16%

31%

35%

1%

0

Postgraduate University Degree

Undergraduate University Degree

Certificate / Trade Qualification

Secondary School / Senior Level

Primary School / Junior Level

Prefer not to say

1%

7%

7%

15%

25%

41%

4%

Less than 1 year

1-2 years

3-5 years

6-10 years

11-20 years

21+ years

Prefer not to say



Responding small business owners were asked how many years of experience they had in business management roles, including businesses they didn’t own (Figure 50). Eight percent of respondents reported that they had five years or less of management experience. Ten percent had six to ten years in management roles, 22% had 11 – 20 years and 55% had 21 years or more experience in a management role and 5% preferred not to say.

Figure 50: Small business participant experience in business management.

Source: SB A10 In total, how many years of experience have you had in business management roles, including businesses you did not own? (n=460).

Indigenous Owned Businesses Small businesses were asked if their business was 50% or more Indigenous owned. Of the sample, eight (2%) identified as being Indigenous owned businesses. Due to the low number of Indigenous small businesses surveyed, separate analysis of this group could not be conducted.

2%

2%

4%

10%

22%

55%

5%

Less than 1 year

1-2 years

3-5 years

6-10 years

11-20 years

21+ years

Prefer not to say



Industry A variety of industries were represented within the sample of small businesses (Figure 51). Retail trade comprised the majority of respondents (27%) with professional, scientific and technical services at 12% and accommodation and food services at 11%.

Figure 51: Types of industries.

Source: SB A4: What is the main industry sector in which you operate? (n=460)

27%12%

11%10%

9%5%

4%4%4%

3%2%2%

1%1%1%1%

00

3%0

Retail TradeProfessional, Scientific and TechnicalAccommodation and Food Services

ManufacturingHealth Care and Social Assistance

ConstructionFinancial and Insurance Services

Rental, Hiring and Real Estate ServicesEducation and Training

Arts and Recreational ServicesTransport, Postal and Warehousing

Wholesale TradeAgriculture, Forestry and Fishing

Information Media and TelecommunicationsElectricity, Gas, Water and Waste Services

MiningAdministration and Support Services

Public Administration and SafetyOther Services

Other



Ownership Structure of Small Businesses The small businesses surveyed were predominantly owned by an individual (38%), family owned (24%) or comprised of a partnership (23%). The remaining ownership structures included; employee owned (4%), publically owned (3%) and contractor or franchise at 1% each (Figure 52).

Figure 52: Ownership structure.

Source: SB A1 Which of the following best describes the ownership structure of your business? (n=460).

38%

24%

23%

6%

4%

3%

1%

1%

0

Sole owner / manager

Family owned company or trust

Partnership

Other

Employee owned company

Publically owned company

Contractor

Franchise

Prefer not to say



APPENDIX 2: SMALL BUSINESS QUALITATIVE INTERVIEW DISCUSSION GUIDE

1. Introduction (5 minutes – The purpose of this section is to clarify the reasons for the research and build rapport with the participant.)

• Introduce self • Thank participant for their time • We are an independent research company doing some research for the ATO • The purpose for this research is to find better ways to support small businesses, especially in

managing their cash flow • This will be a completely confidential and informal discussion and there are no right or wrong

answers. I’d ask you to be as honest as possible with your answers. The final report will show the combined responses of the people we speak to. Nothing you say will be attributed to you or your business.

• If you’re comfortable, I would like to record the interview to assist with preparing our report. We adhere to the privacy principles of the Australian Market and Social Research Society.

• If you require further details of the project, please feel free to refer to the following: • ATO website: https://www.ato.gov.au/About-ATO/Research-and-statistics/Current-research-

projects/ • Contact Angie Kelly, Small Business Engagement and Support, ATO on (07) 3213 3728 or

[email protected]

2. Business context (10 minutes – The purpose of this section is to enable the participant to ‘open up’, speak freely and to learn about their specific business and knowledge of financial management, including cash flow)

Tell me a little bit about your business. • How long have you run this business? • Do you have any employees? If so, how many? • Have you had any informal support while running your business (such as short info sessions from

CCI, mentoring, online advice etc.)? What is your business background?

• How long have you been a business owner for, in total, including this current business? • Have you owned a business prior to this one? • Have you ever undertaken any formal education or training – to what level? • How long ago did you do this study? • Did it cover business management or financial management?

How is your business currently positioned? • Are you expanding (growing), consolidating, declining (making a loss/shrinking/struggling) etc.? • Does this change throughout the year or from year to year? • What is the cash flow position of your business? (positive, negative, in debt, don’t know)

3. Advisors (5 minutes – The purpose of this section is to gain clarity about their formal or informal business networks)

Do you use an accountant or Business advisor? • What role does your accountant/Business advisor play in your business? • What motivates you to pay for their advice (if they do seek their advice)?

Do you use any informal networks for business information or advice? • If so, who? • What role do they play in your business?



4. General information (10 minutes – the purpose of this section is to gain clarity about the types of support, information or training that may be useful)

Have you ever sought support, information or training for anything while running your business? (doesn’t have to be on financial or business management) What support, information or training did you find or receive? Did you believe the support, information or training you received helped you in your business?

• If yes, how? • If no, why not?

5. Motivations – financial management (10 minutes – The purpose of this section is to gain clarity about their knowledge and understanding of financial management)

Have you ever sought assistance or training for financial management? • When did you seek assistance or training with financial management?

Why did/didn’t you seek training or improving your knowledge on financial management? (i.e. what deterred or prevented you from seeking this knowledge)

What assistance or training did you find or receive? (Accountant, online, friends etc.) Did you believe the assistance or training you received helped you?

• If yes, how? • If no, why not?

What would be the advantages of learning more about financial management? Would you consider going to your accountant or Business advisor to learn about financial management?

• Would you be prepared to pay for that service? • If no, what stops you?

6. Exploring cash flow management practice (10 minutes – The purpose of this section is to explore how they practice cash flow management in their natural systems)

• Do you keep track of your cash flow? How do you do this? • Do you have any tools you use to manage your cash flow? • Are you likely to seek advice about managing your cash flow? • Who are you likely to seek that advice from? • How are you using cash flow management strategies to plan and manage in your everyday

business activities? • Or aren’t you? And is there a reason for that? • What type of cash flow management tools would you like to use? (e.g. online, checklist, prompt

cards) • Has the way you manage your cash flow changed during the time you’ve owned your

business? How? Was it for the better? • What advice would you give to a person who is starting a new business as far as managing their

cash flow?

7. Barrier reduction (10 minutes – The purpose of this section is to understand how they can be better supported in relation to improving their cash flow management)

• Reflecting on your answers, what do you think could be done to make it easier for businesses to

access support or training for cash flow management? • What would have encouraged you to seek support on how to manage your cash flow? • What sort of support would be useful for managing your cash flow? • How would you like cash flow management support and services to be provided – in an ideal

world? (online, face to face etc.) • Have you ever called the ATO for advice?

o If no, why not? o If yes, what has been your experience?



8. Questions specific to Cash Flow Management Program Participants (5 minutes – The purpose of this section is to gain insights into the small business client experience with the Cash Flow Management Program)

• What did you learn from the Cash Flow Management Program? • What changes did you make to your business as a result of the Cash Flow Management

Program? • What impact did each change have on your business? • Has the Cash Flow Management Program helped you to improve the cash flow of your

business? Explain • Now that you have been using the package for a while, what specific resources within the

package were most useful? (e.g. the canvas, action cards etc.)

9. Close (5 minutes)

Do you have anything you would like to add?

Do you have any questions for us? [Thanks, incentive and signature/acknowledgement of incentive.]



APPENDIX 3: TAX PROFESSIONALS’ QUALITATIVE DISCUSSION GUIDE

1. Introduction (5 minutes – The purpose of this section is to clarify the reasons for the research and build rapport with the participant.)

• Introduce self. • Thank participant for their time. • We are an independent research company doing some research for the ATO. • The purpose for this research is to find better ways to support small businesses, especially in

managing their cash flow. • This will be a completely confidential and informal discussion and there are no right or wrong

answers. I’d ask you to be as honest as possible with your answers. The final report will show the combined responses of the people we speak to. Nothing you say will be attributed to you or your business. The information you provide will not be used for compliance purposes. The data will be de-identified and only reason any identifying information will be collected is for reimbursement purposes only. Identifying information and data collected will be kept separate from the final report.

• If you’re comfortable, I would like to record the interview to assist with preparing our report. We adhere to the privacy principles of the Australian Market and Social Research Society.

If you require further details of the project, please feel free to refer to the following:

• ATO website: https://www.ato.gov.au/About-ATO/Research-and-statistics/Current-research-projects/

• Contact Angie Kelly, Small Business Engagement and Support, ATO on (07) 3213 3728 or [email protected] mailto:[email protected]:[email protected]

2. Business context (10 minutes – The purpose of this section is to enable the participant to ‘open up’, speak freely and to learn about their specific business)

Tell me a little bit about your business. • How long have you run this business? • Do you have any employees? If so, how many?

What is your professional background? • How long have you been a Business advisor? • Have you had a previous career or profession prior to becoming a Business advisor? • Do you own your own business as well as being a Business advisor? • Can you tell me about your formal education and training? Did this cover business/financial

management qualifications as well as tax? What is your specific area of expertise?

• Do you cover multiple areas?

3. General services provided (10 minutes – the purpose of this section is to gain clarity about the types of services provided and how these are received)

• What types of services do you provide to small businesses? • How do they respond to these services? • Is cost an issue? • What services and advice do you think clients are willing to pay for? • What services and advice do you believe they expect? • Do you provide any training or support to clients to help them understand financial or business

management?



4. Motivations – cash flow management (10 minutes – the purpose of this section is to gain clarity about their knowledge and understanding of cash flow management)

• Do small business owners come to you of their own accord for cash flow management advice?

Or is it in response to your suggestion/prompt? • What do you mean when you talk about cash flow? • Why do you think business owners decide to seek training and improve knowledge of cash flow

management? • When do you think business owners realise they need assistance or training with cash flow

management? • How do you help clients with cash flow issues? Are you:

o Proactive – build your client’s skills/knowledge to be able to manage cash flow, before any issues arise

o Reactive – focus on fixing immediate issues o Strategic. – build their skills/knowledge more broadly around their financial

management and business management practices.

5. Exploring cash flow management practice (15 minutes – The purpose of this section is to explore how they practice cash flow management in their natural systems)

• Do you think it is possible for small business owners to incorporate cash flow management

strategies into everyday business activities? • Are there reasons this might not be possible or practical? • What tools do you currently recommend or see as being most effective for cash flow

management? • What type of cash flow management tools would you like to see more widely used? • Any evidence of cash flow assistance: are they a traditional accountant or a value-add

accountant? • Do you have any ‘good practice’ stories about assisting a client with cash flow issues?

6. Barrier reduction (10 minutes – The purpose of this section is to understand how they can be better supported in relation to improving their cash flow management)

• What do you think could be done to make it easier for businesses to access assistance and

training for cash flow management? • What have been the most effective strategies for encouraging small business owners towards

upskilling in relation to cash flow management? • How would you like to see cash flow management training provided? • What do you find are the most effective strategies for presenting cash flow management

information and ideas to small business owners?

7. Close (5 minutes)

Do you have anything you would like to add?

Do you have any questions for us? [Thanks, incentive and signature/acknowledgement of incentive.]



APPENDIX 4: QUANTITATIVE SURVEY FOR SMALL BUSINESS Questionnaire Structure

Section Objectives Length

Introduction 1:00 minutes

Section SQ Screening questions 0:30 minutes

Section A Business demographics 1:30 minutes

Section B: Identify the motivations and barriers to small businesses seeking expert advice in regards to managing cash flow. Includes tracking from 2016 research.

3:00 minutes

Section C Identify what drives cash flow issues. Explore small business’s perspective of cash flow issues. Includes tracking from 2016 research.

3:30 minutes

Section D Understand small business education needs, preferences, motivations and barriers in regards to managing cash flow. Includes tracking from 2016 research.

3:30 minutes

Close 0:30 seconds

Total 13:30 minutes

Convention DNRO – Do not read out RO – Read out SR – Single response MR – Multiple responses INTRODUCTION

Hello, my name is ______________ from Q&A Research. We are calling on behalf of the Australian Tax Office to conduct a short survey of small businesses.

The purpose of the survey is to better understand how small businesses manage their business finances and cash flow and how their advisors and the ATO can support them to do this effectively.

The survey will take about 15 minutes. It can be done now or at a time convenient to the Business Owner. May I speak to the Business Owner please?

[IF JOINT OWNERS, ASK FOR THE ONE THAT IS THE PERSON WHO MAINLY LOOKS AFTER FINANCIAL MANAGEMENT AND CASH FLOW].

[IF MORE INFORMATION ON RESEARCH IS REQUIRED]

The ATO is seeking a deeper understanding of what drives small business cash flow issues, how effectively they manage cash flow and related issues, and who helps them. In addition, the research aims to identify broader financial management education and support needs of small business, with a particular focus on cash flow, when small businesses need this education and how they want it.

This research will provide important information about how the ATO can better provide timely financial management resources and support to small businesses.



[IF QUERIED ABOUT BONA FIDES OF RESEARCH]

As a Market Research company, we comply with the requirements of the Privacy Act. Would you like me to read out the details of how Q&A complies with the Privacy Act?

In accordance with the Privacy Act, once information processing has been completed, please be assured that your name and contact details will be removed from your responses to this survey. After that time, we will no longer be able to identify the responses provided by you. However, for the period that your name and contact details remain with your survey responses, which will be approximately 2 to 4 weeks, you will be able to contact us to request that some or all of your information be deleted.

I can provide the names of people who will verify the legitimate nature of this research project:

• The Australian Market and Social Research Society enquiry line on 1300 364 830 who can verify that we are a legitimate market and social research company.

• The research project manager, Katina Law at IPS, the organisation managing this research project, is available to discuss the specifics of this research. Katina can be contacted on 0418 194 887.

• You can also verify the authenticity of the research by contacting the ATO switchboard on 13 28 69 and asking for Sonia Ward ext. 33084.

• Alternatively, you can check the credentials for Small business cash flow education research (2017-70) on the ATO website:

http://www.ato.gov.au/About-ATO/Research-and-statistics/Current-research-projects

Section SQ: Business Screening Questions

To start off with, I have a few questions about this business to help to determine if it is in scope of this survey. SQ1: What was your approximate turnover for the financial year 2015-2016? IF NECESSARY: Turnover is also known as ‘Gross sales’ or ‘revenue’ IF NECESSARY: The financial year for this question relates to 1 July 2015 to 30 June 2016

RO

Under $75 000 1

Between $75,000 to $2 million 2

Over $2 million 3 Thank and close – do not recruit

Not currently operating a business [DNRO] 4 Thank and close – do not recruit

Prefer not to say [DNRO] 99 Thank and close – do not recruit



SQ2: Where is your main business location? SR. PROMPT IF NECESSARY. IF MENTION ‘OVERSEAS’, ASK: Where is the main location in Australia? IF MULTIPLE LOCATION IN AUSTRALIA, CLARIFY: This is where you have the largest part of your business

Sydney 1 Check quotas. If quota achieved, thank and close – do not recruit.

NSW 132

VIC 107

QLD 83

WA 54

SA 38

TAS/NT 18

ACT 18

Total 450

NSW – other 2

Melbourne 3

VIC – other 4

Brisbane 5

QLD – other 6

Perth 7

WA – other 8

Adelaide 9

SA – other 10

TAS 11

NT 12

ACT 13

Section A: Business Demographics

A1: Which of the following best describes the ownership structure of your business? RO, MR

Sole owner/manager 1

Partnership 2

Family owned company or trust 3

Employee owned company, that is, all shareholders work within the business 4

Publicly owned company, that is, shares in the company are traded on the Australian Stock Exchange

5

Contractor 6

Franchise 7

Other (please specify) 8

Prefer not to say [DNRO] 99



A2: Is your business 50% or more Indigenous owned?

Yes 1

No 2

Unsure/don’t know [DNRO] 98


A3: How many people are currently employed in your business, not including contractors, volunteer staff or yourself?

Record number


A4: What is the main industry sector in which you operate? DNRO, SR

Agriculture, Forestry and Fishing 1

Mining 2

Manufacturing 3

Electricity, Gas, Water and Waste Services 4

Construction 5

Wholesale Trade 6

Retail Trade 7

Accommodation and Food Services 8

Transport, Postal and Warehousing 9

Information Media and Telecommunications 10

Financial and Insurance Services 11

Rental, Hiring and Real Estate Services 12

Professional, Scientific and Technical Services 13

Administrative and Support Services 14

Public Administration and Safety 15

Education and Training 16

Health Care and Social Assistance 17

Arts and Recreation Services 18

Other Services 19


Unsure 98


A5: What is the highest level of education you have achieved? Is it … ? RO, SR

Primary school / Junior school 1

Secondary school / Senior school 2

Certificate / Trade Qualification 3

Undergraduate University Degree 4

Postgraduate University Degree 5




A6: How long has your main business been in operation? DNRO SR

Less than 1 year 1

1-2 years 2

3-5 years 3

6-10 years 4

11-20 years 5

21+ years 6

Don’t know/can’t remember [DRNO] 98


A7: Which of the following best represents the stage your main business is currently in? RO. SR

My business is in the early stages (start-up phase) 1

The business is established 2

The business is about to go through major changes (e.g. expanding, downsizing, changing direction) 3

I am considering exiting the business (e.g. selling, closing, transferring ownership) 4

Don’t know/not sure [DNRO] 98


A8: Is this the first business you have owned?

Yes 1

No 2


A9: How many years have you been a small business owner, not just in your current business?

A10: In total, how many years of experience have you had in business management roles, including businesses you did not own?

Record Number of Years


Record Number of Years




Section B: Motivations and barriers to seeking expert advice We are now going to ask some questions to understand what motivates you to seek advice from experts, as well as what barriers may exist to stop you from doing this. B1: Thinking about when you first started your business, who helped you set up your business? RO MR

Accountant 1

BAS Agent 2

Bookkeeper 3

Family member 4

Small Business Centre 5

Industry Group 6

Mentor 7

Other Small Business Owner 8

I did it myself 9


Don’t know 98


The next few questions will help us to learn how businesses develop their knowledge about business management and financial management, including tax and super, through a variety of formal and informal networks. B2: For each person or organisation, please indicate on a score of 1 to 5, where 1 is never rely on them

for advice and 5 is always rely on them for advice, about tax and super.

Never rely on for advice

Always rely on for advice

Not applicable Don’t

know/unsure

Business advisor, coach or mentor 1 2 3 4 5 6 98

Tax agent / accountant 1 2 3 4 5 6 98

Bookkeeper 1 2 3 4 5 6 98

Other owners in your business 1 2 3 4 5 6 98

Friends or family members 1 2 3 4 5 6 98

Other business owners, acquaintances or peers

1 2 3 4 5 6 98

Associations, industry bodies or the chambers of commerce. 1 2 3 4 5 6 98

Government department or agency 1 2 3 4 5 6 98

Employee within your business 1 2 3 4 5 6 98



B3: Who is the main provider of professional advice for your business? DNRO, SR

Accountant 1

Bookkeeper 2

BAS Agent 3

Business advisor 4

Financial advisor 5

Legal advisor 6


I do not pay anyone for business or financial advice

8 Proceed to B13

Prefer not to say [DNRO] 99 Proceed to B13

B4: Thinking about your [insert response from B3], how often would you interact with this advisor? DNRO (prompt if needed), SR

Once per year 1

Twice a year 2

Quarterly 3

Monthly 4

Fortnightly 5

Weekly 6

Continuous communication 7

As needed (when I have a problem/issue or want to discuss something) 8

Other 9

Unsure 98


B5: What is the main reason (if any) that prevents you from interacting with your [insert response from B3]

as often as you’d like or need to? DNRO, SR

Cost (I don’t have the money to use them that often[DNRO]) 1

Time 2

I’m not sure what they can help me with 3

I don’t think they understand my business enough 4

I don’t think they offer me value for money 5

Nothing prevents me. (I contact them as often as I’d like or need to.) 6


Unsure 98




B6: What services does your [insert response from B3] provide? DNRO (but can prompt if required), MR

TAX OBLIGATIONS e.g. such as income tax return, BAS, Pay As You Go Withholding, Super, Fringe Benefits Tax (FBT), Payroll Tax

1

TAX INFORMATION e.g. advising on tax regulations, legal changes, updates, general tax advice/planning

2

DEALING WITH GOVERNMENT/REGULATORS e.g. Tax audits/company audits 3

BUSINESS STRATEGY AND PLANNING/STRUCTURE e.g. dealing with changes in my industry, competition, economic conditions

4

RESEARCH AND DEVELOPMENT e.g. product development/getting IP registered

5

MARKETING e.g. website/online presence/digital strategy/advertising

6

SYSTEMS/RECORDS SET UP AND MAINTENANCE e.g. business software, record keeping

7

FINANCIAL MANAGEMENT e.g. advice on capital raising and other business financing options (loans), planning

around major business asset purchases

8

CASH FLOW MANAGEMENT e.g. advice on managing payments in/out, expenses

9

PRICING STRATEGIES e.g. advice on costing of jobs, product pricing strategy. discount policy, loyalty

programs etc.

10

STAFF RELATED ADVICE/SERVICES e.g. planning around staffing levels legal issues around employees services in relation to recruitment advice on/manage processes and obligations when staff commence

14

Selling the business/business exit strategy 15


Unsure/don’t know 98




I am going to read out a series of statements and I would like you to rate your response on a scale of 1-5, where 1 is strongly disagree and 5 is strongly agree:

Strongly Disagree

Disagree Neither Agree Strongly Agree

Not Applicable

Don’t know/ Unsure

B7: I use my [insert response from B3] to make sure I am not doing the wrong thing.

1 2 3 4 5 6 98

B8: My [insert response from B3] understands my business.

1 2 3 4 5 6 98

B9: I trust the advice of my [insert response from B3].

1 2 3 4 5 6 98

B10: I use my [insert response from B3] to help plan my business.

1 2 3 4 5 6 98

B11: I can afford to pay for the advice I require from my [insert response from B3].

1 2 3 4 5 6 98

B12: I use my [insert response from B3] to plan cash flow strategies in my business.

1 2 3 4 5 6 98



I am going to read out another list of statements. For each can you rate how well it describes you as a business owner/manager. A rating of 1 indicates that the statement does not describe you at all. A rating of 5 indicates that the statement describes you very well.

Poor Match

Perfect Match

Not Applicable

Don’t know/ Unsure

B13: I am good at accessing and using professionals like accountants, tax agents and business advisors for my business.

1 2 3 4 5 6 98

B14: I have a good understanding of accounting and bookkeeping.

1 2 3 4 5 6 98

B15: I am confident that my business finances are being well managed.

1 2 3 4 5 6 98

B16: I am confident using accounting software to manage my business.

1 2 3 4 5 6 98

B17: I know how and where to get information for my business tax and super needs as it changes or grows.

1 2 3 4 5 6 98

B18: I understand how tax and super works and feel equipped to manage these areas of my business.

1 2 3 4 5 6 98

B19: I am confident my business is tax and super compliant. 1 2 3 4 5 6 98



Section C: Understanding cash flow and related issues C1: On a scale from 1 to 5, how would you describe the financial state of your business right now, with

1 being under pressure and 5 growing strongly.

Under Pressure………………………Growing Strongly Not Applicable Unsure

1 2 3 4 5 6 7

C2: Do you keep track of your cash flow?

Yes 1

No 2


C3: Has your business ever experienced cash flow issues? Prompt if necessary: Cash Flow is often described as the money going in and out, required to operate a business

No 1 Proceed to C8

Yes 2 Proceed to C4

Unsure/don’t know [DNRO] 98 Proceed to C8

Prefer not to say [DNRO] 99 Proceed to C8

C4: How soon after starting your business did cash flows issues arise? (DNRO)

Within the first year of being in business 1

12 months – less than 2 years 2

2 years – 5 years 3

5 years + 4

Unsure/don’t know [DNRO] 98

Prefer not to say (DNRO) 99



C5: What were the causes of these cash flow issues? DNRO (unless prompts are required), MR

PRICING e.g. didn’t charge enough to cover my costs had to reduce prices to compete

1

ISSUES WITH PAYMENTS FROM CUSTOMERS/CLIENTS e.g. customers/clients didn’t pay/didn’t pay on time I gave people too long to pay

I didn’t chase up payments

2

VOLUME OF WORK/SALES e.g. increased competition in my market changes in my industry economic conditions/downturn

3

EXPENSES e.g. unexpected expenses/increase in expenses high overheads

4

COSTS/TIMING OF PAYING FOR SUPPLIES/STOCK e.g. suppliers reduced the time I had to pay

bought more stock/supplies than I needed

5

STAFFING COSTS e.g. too many/not enough staff not the right staff mix – inefficiencies staff turnover

6

MONEY TIED UP IN BUSINESS EQUIPMENT/ASSETS e.g. business equipment/vehicles under-used cost of buying business equipment/assets

7


Don’t know [DNRO] 98


C6: And was there a particular event or circumstance that led to, or contributed to, the cash flow issues?

DNRO (unless prompts required), MR Made a change to the business e.g. expanded or reduced; took on a new line of business/product, took on employees

1

When I had to pay tax and/or super obligations 2

Personal circumstances e.g. sickness, death, relationship change, natural or other disaster (fire etc.)

3

Fraud/crime against my business 4

Other (specify) 5

None 6





C7: What action did you take to help resolve your cash flow issue/s? DNRO (unless prompts are required), MR

PRICING e.g. increased my prices focused on most profitable products/customers improved service/quality/value for customers

1

IMPROVED PAYMENTS FROM CUSTOMERS/CLIENTS e.g. reduced payment terms for clients sent out invoices more promptly gave a discount for clients paying early followed up late payers

2

EXPANDED VOLUME OF WORK/SALES e.g. expanded my range of products/services expanded my market (new territory/area) marketed my products/services

3

REDUCED EXPENSES e.g. reduced discretionary spending negotiated better deals e.g. utilities, finance costs

4

REDUCED OR DEFERRED COSTS FOR SUPPLIES/STOCK e.g. negotiated better terms with my suppliers improved my ordering system

5

EFFICIENCIES IN STAFFING COSTS e.g. improved rostering to match demand employed/rostered staff with better mix of skills focused on attracting/retaining good staff

6

REDUCED COSTS FOR BUSINESS EQUIPMENT/ASSETS e.g. sold some business assets refinanced assets/sell and lease back)

7

BORROWED MONEY e.g. got a loan from bank/family/friends

8

IMPROVED PLANNING/MANAGEMENT e.g. improved records to keep track of things planned better for future payments got a book-keeper or accountant to help me

9

Made a plan to exit the business 10


Unsure 98




Thinking about when you first started in business, how would you rate your knowledge of the following, where 1 is very poor and 5 is very good?

Very Poor Poor Neither Good Very Good

Not applicable

Don’t know/unsure

C8: Business management knowledge

1 2 3 4 5 6 98

C9: Financial management knowledge

1 2 3 4 5 6 98

C10: Cash flow management knowledge

1 2 3 4 5 6 98

How would you rate your ability now, in relation to the following, on a scale from 1 to 5, where 1 is very poor and 5 is very good?

Very Poor

Poor Neither Good Very Good

Not applicable

Don’t know/unsure

C11: Managing cash flow 1 2 3 4 5 6 98

C12: Awareness of cash coming in/cash going out

1 2 3 4 5 6 98

C13: Managing invoicing 1 2 3 4 5 6 98

C14: Managing payments I need to make (e.g. to suppliers, bank, ATO)

1 2 3 4 5 6 98

C15: Managing customer payments (so I am paid promptly)

1 2 3 4 5 6 98

C16: Forecasting (business finances)

1 2 3 4 5 6 98

C17: On average, how much time do you spend managing your cash flow? [DNRO] Allow participant to answer, then clarify e.g. hours per day/week. Record answer in hours - add hours to most appropriate column.

Per Day

Per Week

Per Fortnight

Per Month

Per Quarter

Per Six Months

Per Year

Record Hours

Don’t know 98

Prefer not to say 99



C18: What is the main tool (if any) that you use to track your cash flow? DNRO (prompt if necessary), SR

Software or web based accounting tool e.g. Xero, MYOB, Quickbooks, Accelerate

1 Proceed to C19

Industry based cash flow tool e.g. Clinico 2 Proceed to C19

Excel/Spreadsheet 3 Proceed to C19

Online banking information/app 4 Proceed to C19

Pen and paper methods 5 Proceed to D1

Other (please specify) 6 Proceed to D1

I don’t use a tool for tracking cash flow 98 Proceed to D1

Prefer not to say [DNRO] 99 Proceed to D1

C19: On a scale from 1 to 5, where 1 is strongly disagree and 5 is strongly agree, are the reports

generated by your software or web-based system helpful in understanding cash flow?

Strongly Disagree


Not applicable

Don’t know/ unsure

1 2 3 4 5 6 98



Section D: Understanding small business education needs D1: On a scale of 1 to 5, with 1 being not at all important and 5 being very important, how important is it to improve your own knowledge about business management and financial management right now?

Not at all important

Very important

Not applicable


1 2 3 4 5 6 98

ASK IF ANY SCORED LESS THAN 5 3 IN D1 D2: Are there particular reasons why you are not interested in learning more about business management and financial management? DNRO, MR

ASK IF ANY SCORED 4 OR MORE IN D1 D3: Can you please tell me why it is important to you to improve your knowledge about business management and financial management? DNRO [SR]

I have an employee who manages these areas 1

I have an external consultant/advisor who manages these areas 2

I feel competent in these areas and don’t think I need to learn more 3

I will ask for help from my friends/family or business acquaintances if I need to 4

I don’t have time to invest in learning about these issues 5

I am just not interested in this area of the business 6

It is not important right now 7

My business partners take care of these matters 8

I have employees who take care of these matters 9

I don’t know where to go to learn more 10


To save money 1

To be able to do some of it myself 2

To be better informed 3

To feel more in control of my business 4

To understand what my advisor/consultant is talking about 5





On a scale of 1 to 5, to what extent do you agree or disagree with the following statements, where 1 is strongly disagree and 5 is strongly agree.

Strongly Disagree


Not applicable


D4: I am not interested in improving my knowledge of cash flow management

1 2 3 4 5 6 98

D5: I am too busy to learn about cash flow management

1 2 3 4 5 6 98

D6: Better understanding of cash flow management would allow me to plan ahead in my business.

1 2 3 4 5 6 98

D7: Having a better understanding of cash flow management would reduce my stress levels

1 2 3 4 5 6 98

D8: I can’t afford to learn about cash flow management.

1 2 3 4 5 6 98

D9: I know all I need to know about cash flow management

1 2 3 4 5 6 98

D10: It is not my job to understand cash flow management

1 2 3 4 5 6 98



D11: Where do you go for information or advice in relation to financial management? DNRO, MR

Look for online resources 1

Contact a small business advisory service in my community 2

Contact my professional financial advisor 3

Consult friends or family 4

Talk to other businesses in my sector 5

Contact my industry association or body 6

Look on social media (e.g. Facebook, LinkedIn) 7

I attend a small business expo/event 8

Contact the ATO 9

Contact another government agency (local, state, federal) 10


None of these things 12



On a scale of 1 to 5, where 1 is least preferred and 5 is most preferred, please indicate your preferred method of building your business and financial management knowledge, including tax and super.

Least preferred

Most preferred

Not applicable

Don’t know/unsure

D12: Short face to face seminars 1 2 3 4 5 6 98

D13: Phone consultations 1 2 3 4 5 6 98

D14: Face to face group training courses

1 2 3 4 5 6 98

D15: Online tutorials/training/videos accessible any time

1 2 3 4 5 6 98

D16: Online tools, checklists and calculators

1 2 3 4 5 6 98

D17: Live webinars (online seminars) with question and answer sessions

1 2 3 4 5 6 98

D18: Case studies and examples 1 2 3 4 5 6 98

D19: Emails with important and relevant information

1 2 3 4 5 6 98

D20: Networking events e.g. small business expos/community events/business breakfasts

1 2 3 4 5 6 98

D21: Websites 1 2 3 4 5 6 98

D22: Self-guided books/manuals 1 2 3 4 5 6 98

D23: Other (please specify) 1 2 3 4 5 6 98



D24: What would be your most preferred source for obtaining cash flow and financial management information or training? DNRO SR. Prompt: if necessary

An industry association or body 1

A business support organisation/advisory organisation in my local community 2

Accountant/bookkeeper 3

A private business education and training provider 4

ATO 5

Other government department – local, state or federal 6


I don’t know 98




Standard close

Thank you very much for your participation in our survey. Just to confirm, all the answers you provided are treated in the strictest confidence and will be aggregated with other people’s answers for analysis. They will not be passed on to anyone or anywhere else.

In case my supervisor needs to contact you to check the validity of this interview, could I please confirm some details?

RESPONDENT’S FIRST NAME: ____________________

PHONE (STD VITAL AS GOES INTO COMPUTER): _______________________________________

COMPANY NAME: _______________________________

As a Market Research company, we comply with the requirements of the Privacy Act. Would you like me to read out the details of how Q&A complies with the Privacy Act (again)?


Thank you for your time.

Please read to participants:

The Australian Market and Social Research Society’s Surveyline on 1300 364 830 is available for you to call if you would like to check that Q&A Market Research is recognised by the society as a bona fide research company.

Termination script

Thank you for your time. Unfortunately, we have reached the allocated quota for this study and I will need to leave the survey there.

Just to confirm, all the answers you provided are treated in the strictest confidence and will be aggregated with other people’s answers for analysis. They will not be passed on to anyone or anywhere else.

In case my supervisor needs to contact you to check the validity of this interview, can I please confirm some details?



COMPANY NAME: _______________________________



APPENDIX 5: QUANTITATIVE SURVEY FOR TAX PROFESSIONALS Questionnaire Structure

Section Objectives (From Brief) Length

Introduction 1:00 minutes

Section A: Business Advisor Demographic Information and screening questions

0:45 seconds

Section B: Identify what drives cash flow issues. Explore Business Advisor’s perspective of cash flow issues.

3:30 minutes

Section C: Identify the motivations and barriers to small businesses seeking expert advice in regards to managing cash flow.

1:45 minutes

Section D: Understand small business education needs, preferences, motivations and barriers in regards to managing cash flow.

3:15 minutes

Close 0:30 seconds

TOTAL 10:45 minutes

Convention DNRO – Do not read out RO – Read out SR – Single response MR – Multiple responses



INTRODUCTION Hello, my name is ______________ from Q&A Research. We are calling on behalf of the Australian Tax Office to conduct a short survey of Business Advisors. The purpose of the survey is to better understand cash flow issues facing small businesses, and how the ATO can better work with advisers and their clients to help small businesses deal with those issues. The survey will take about 15 minutes. It can be done now or at a time convenient. May I speak to somebody who has experience in providing tax and financial advice to Small Business Owners please? [IF MORE INFORMATION ON RESEARCH REQUIRED] The ATO is seeking a deeper understanding of what drives small business cash flow issues, how effectively small businesses manage cash flow and related issues, and who helps them. This research will provide important information about how the ATO can better work with advisers and their clients to help small business improve their knowledge of and ability to manage their business finances and cash flow. [IF QUERIED ABOUT BONA FIDES OF RESEARCH] As a Market Research company, we comply with the requirements of the Privacy Act. Would you like me to read out the details of how Q&A complies with the Privacy Act?


I can provide the names of people who will verify the legitimate nature of this research project.

• The Australian Market and Social Research Society enquiry line on 1300 364 830 who can verify that we are a legitimate market and social research company.

• The research project manager, Katina Law at IPS, the organisation managing this research project, is available to discuss the specifics of this research. Katina can be contacted on 0418 194 887.

• You can also verify the authenticity of the research by contacting the ATO switchboard on 13 28 69 and asking for Sonia Ward ext 33084.

• Alternatively, you can check the credentials for Small business cash flow education research (2017-70) on the ATO website:

http://www.ato.gov.au/About-ATO/Research-and-statistics/Current-research-projects



Section A – Business Advisor Demographic Information and screeners

For the purposes of this survey, we consider small businesses as those having an annual turnover of less than $2 million.

A1: To begin with, could you please tell me where the majority of your small business clients are located?

SR. PROMPT IF NECESSARY. IF MENTION ‘OVERSEAS’, ASK: Where is the main location in Australia where you have small business clients? IF MULTIPLE LOCATION IN AUSTRALIA, CLARIFY: This is where you have the largest number of small business clients

Sydney 1 Check Quotas. If quota achieved, thank and close – do not recruit.

Business Advisors

BAS agents

NSW 35 9

VIC 28 7

QLD 22 6

WA 15 4

SA 10 3

TAS/NT 5 1

ACT 5 1

Total 120 30

NSW – other 2

Melbourne 3

VIC – other 4

Brisbane 5

QLD – other 6

Perth 7

WA – other 8

Adelaide 9

SA – other 10

TAS 11

NT 12

ACT 13

A2: How long have you been a Business Advisor? DNRO, SR

Less than 1 year 1

1–2 years 2

3–5 years 3

6–10 years 4

11–20 years 5

21+ years 6

Don’t know/can’t remember 98




A3. What are your areas of expertise? DNRO, MR

Bookkeeping 1

Tax 2

Accounting 3

Preparation of financial reports 4

Transactional advice 5

Business advice 6

Strategic advice 7

Superannuation 8


Prefer not to say[DNRO] 99



Section B: Understanding cash flow and related issues B1: Thinking about your small business clients, in terms of the financial state of their businesses, what

proportion are under pressure, growing strongly or somewhere in between? RO, enter proportion (%) for each broad grouping Under pressure Insert %

Somewhat under pressure Insert %

Neither growing nor under pressure (in the middle) Insert %

Growing somewhat Insert %

Growing strongly Insert %

Don’t know/Unsure 98

Prefer not to answer 99

B2: From your observation, for those clients who have cash flow issues, how soon after starting in business do they typically start having problems? (DNRO) Within the first year of business 1

12 months – less than 2 years 2

2 years – 5 years 3

5 years + 4

I don’t know 98


B3: For your small business clients who have had cash flow issues, are there particular events or circumstances that caused these issues? DNRO (unless prompts required), MR

Made a change to the business e.g. expanded or reduced; took on a new line of business/product, took on employees

1

When they have to pay tax and/or super obligations 2

Personal circumstances e.g. sickness, death, relationship change, natural disaster and/or fire

3

Fraud/crime against the business 4

Other (specify) 5

None 6

Unsure/don’t know/don’t remember 98




B4: What do you believe are the typical causes of cash flow issues for your small business clients?DNRO (unless prompts are required), MR

PRICING e.g. didn’t charge enough to cover their costs had to reduce prices to compete

1

ISSUES WITH PAYMENTS FROM CUSTOMERS/CLIENTS e.g. customers/clients didn’t pay/didn’t pay on time they gave people too long to pay they didn’t chase up payments

2

VOLUME OF WORK/SALES e.g. increased competition in their market changes in their industry economic conditions/downturn

3

EXPENSES e.g. unexpected expenses/increase in expenses high overheads

4

COSTS/TIMING OF PAYING FOR SUPPLIES/STOCK e.g. suppliers reduced the time they had to pay bought more stock/supplies than needed

5

STAFFING COSTS e.g. too many/not enough staff not the right staff mix – inefficiencies staff turnover

6

MONEY TIED UP IN BUSINESS EQUIPMENT/ASSETS e.g. business equipment/vehicles under-used cost of buying business equipment/assets

7


Don’t know [DNRO] 98




B5: What advice do you typically give to clients to help them better manage their cash flow? DNRO, MR

PRICING e.g. increase their prices to cover costs focus on most profitable products/customers improve service/quality/value for customers

1

IMPROVE PAYMENTS FROM CUSTOMERS/CLIENTS e.g. reduce payment terms for clients

send out invoices more promptly give a discount for clients paying early follow up late payers

2

EXPAND VOLUME OF WORK/SALES e.g. expand their range of products/services expand their market (new territory/area) market their products/services/market more

3

REDUCE EXPENSES e.g. reduce discretionary spending negotiate better deals e.g. utilities, finance costs

4

REDUCE OR DEFER COSTS FOR SUPPLIES/STOCK e.g. negotiate better terms with their suppliers improve their ordering system

5

EFFICIENCIES IN STAFFING COSTS e.g. improve rostering to match demand employ/roster staff with better mix of skills focus on attracting/retaining good staff

6

REDUCE COSTS FOR BUSINESS EQUIPMENT/ASSETS e.g. sell some business assets (e.g. if underused) refinance assets/sell and lease back)

7

BORROW MONEY/USE CAPITAL e.g. get a loan from bank/family/friends draw down on the business capital

8

IMPROVE PLANNING/MANAGEMENT e.g. improve records to keep track of things plan better for future payments/pay ahead make better use of professional services

9

Make a plan to exit the business 10

Other (please specify)[DNRO] 98




The next few questions relate to your client's knowledge and management of their cash flow.

Thinking about when your clients first started in business, how would you rate their knowledge of the following, where 1 is very poor and 5 is very good?

Very Poor Poor Neither Good Very Good

Not applicable

Don’t know/unsure

B6: Business management knowledge

1 2 3 4 5 6 98

B7: Financial management knowledge

1 2 3 4 5 6 98

B8: Cash flow management knowledge

1 2 3 4 5 6 98

How would you rate your clients’ ability now in relation to the following, on a scale from 1 to 5, where 1 is very poor and 5 is very good?

Very Poor

Poor Neither Good Very Good

Not applicable


B9: Managing cash flow

1 2 3 4 5 6 98

B10: Awareness of cash coming in/cash going out

1 2 3 4 5 6 98

B11: Managing invoicing

1 2 3 4 5 6 98

B12: Managing creditors (people I owe money to)

1 2 3 4 5 6 98

B13: Managing debtors (those who owe me money)

1 2 3 4 5 6 98

B14: Forecasting 1 2 3 4 5 6 98

B15: Do you recommend tools for managing cash flow to your small business clients? DNRO, SR

Yes 1ProceedtoB16

No 2ProceedtoB17



B16: What is the main tool you recommend clients use to manage their cash flow? DNRO, SR

Software or web based accounting tool e.g. Xero, MYOB, Quickbooks, Accelerate etc.

1 Proceed to B17

Industry based cash flow tool e.g. Clinico 2 Proceed to B17

Excel/Spreadsheet 3 Proceed to B17

Bank information – statement/online statement/banking app 4 Proceed to B18

Pen and paper methods e.g. template on paper 5 Proceed to B18

Other (please specify) 6 Proceed to B18

I don’t recommend a tool for tracking cash flow 7 Proceed to B18

Refused (DNRO) 99

B17: On a scale from 1 to 5, where 1 is strongly disagree and 5 is strongly agree, do the majority of your clients understand the reports generated by their software?

Strongly Disagree


Not applicable


1 2 3 4 5 6 98

B18: Approximately, what proportion of your clients track their cash flow: RO, enter proportion (%) for each broad grouping On a regular basis Enter %

Only some of the time Enter %

Never/not at all Enter %

Unsure 98

Prefer not to answer 99

B19: In your opinion, how much time should clients spend managing their cash flow? [DNRO] Allow participant to answer, then clarify. Option to add hours to appropriate column

Per Day Per Week Per Fortnight

Per Month Per Quarter

Per Six Months

Per Year

Record Hours

Don’t know 98

Prefer not to say [DNRO]

99

B20: On average, how many hours a week do you believe the average client spends managing their cash flow?

Record Hours (DNRO) 1 (insert hours)

Don’t Know (DNRO) 98

Refused (DNRO) 99



Section C: Motivations and barriers to small businesses seeking expert advice C1: On average, how often do your small business clients interact with you?

Once per year 1

Twice a year 2

Quarterly 3

Monthly 4

Fortnightly 5

Weekly 6

Continuous communication 7

Irregularly, but as needed 8

I don’t know 98


C2: Do you believe your clients interact with you as often as they should?

Yes 1ProceedtoC4

No 2ProceedtoC3

C3: What do you believe is the main reason that prevents your clients interacting with you as often as they should? (SR, DNRO)

Cost 1

Time 2

Not knowing the services on offer 3

Don’t want my advice 4


I don’t know 98




C4: What services do you provide to small businesses? DNRO, MR

TAX OBLIGATIONS e.g. such as income tax return, BAS, Pay As You Go Withholding, Super, Fringe Benefits Tax (FBT), Payroll Tax

1

TAX INFORMATION e.g. advising on tax regulations, legal changes, updates, general tax advice/planning

2

DEALING WITH GOVERNMENT/REGULATORS e.g. Tax audits/company audits 3

BUSINESS STRATEGY AND PLANNING/STRUCTURE e.g. dealing with changes in their industry, competition, economic conditions

4

RESEARCH AND DEVELOPMENT

e.g. product development/getting IP registered

5

MARKETING e.g. website/online presence/digital strategy/advertising

6

SYSTEMS/RECORDS SET UP AND MAINTENANCE e.g. business software, record keeping

7

FINANCIAL MANAGEMENT e.g. advice on capital raising and other business financing options (loans),

planning around major business asset purchases

8

CASH FLOW MANAGEMENT e.g. advice on managing payments in/out, expenses

9

PRICING STRATEGIES e.g. advice on costing of jobs, product pricing strategy. discount policy, loyalty

programs etc.

10

STAFF RELATED ADVICE/SERVICES e.g. planning around staffing levels legal issues around employees services in relation to recruitment advice on/manage processes and obligations when staff commence

14

Selling the business/business exit strategy 15


Don't know 98




On a scale from 1 to 5, where 1 is strongly disagree and 5 is strongly agree, to what extent do you agree or disagree with the following statements in relation to your small business clients?

Strongly Disagree


Not applicable


C5: My clients use my skills only to manage their tax and super obligations.

1 2 3 4 5 6 98

C6: My clients understand the advice I give them.

1 2 3 4 5 6 98

C7: My clients follow my advice.

1 2 3 4 5 6 98

C8: I help my clients with their business planning

1 2 3 4 5 6 98

C9: I help my clients develop cash flow strategies for their business.

1 2 3 4 5 6 98

C10: My clients feel I understand their business.

1 2 3 4 5 6 98

C11: My clients can’t afford to pay me for strategic advice.

1 2 3 4 5 6 98

C12: My clients don’t have the time to seek my advice on planning or strategy.

1 2 3 4 5 6 98

C13: My clients are unaware of how I can help them in their business.

1 2 3 4 5 6 98

C14: I feel capable of helping my clients learn more about managing their cash flow

1 2 3 4 5 6 98



Section D: Understanding small business education needs

D1: On a scale from 1 to 5, where 1 is Not at all important and 5 is Very important, how important is it for businesses to improve their knowledge of business and financial management?

Not at all important Very important Not applicable Don’t know/ unsure

1 2 3 4 5 6 98

ASK IF ANY SCORED 5 4 OR MORE IN D1 Why do you believe it is important for small businesses to improve their knowledge of business and financial management? DNRO

D2: How do you currently assist Small Businesses to increase their knowledge of cash flow? DNRO, MR Coach and mentor small businesses 1

Offer suggestions 2

Refer small businesses to training course 3

Refer small businesses to ATO website 4

Refer small businesses to YouTube clips 5

Refer to small businesses industry groups 6

Encourage them to ask me more questions 7

Add information to my business Facebook page or website 8

Add information to my LinkedIn account 9

Refer them to Facebook Groups 10

Refer them to the Accounting Software Help Page/tutorials 11

Direct them to an ATO education product that helps manage cash flow 12

I do not seek to increase small business knowledge of cash flow 14

Other 98


To manage their finances better 1

To be able to do some of it themselves 2

To be better informed 3

To feel more in control of their business 4

To understand the advice I provide to them 5





On a scale from 1 to 5, where 1 is strongly disagree and 5 is strongly agree, to what extent do you agree or disagree with the following statements?

Strongly Disagree


Not applicable

Don’t know/unsure

D4: Small businesses need to learn cash flow management to be successful

1 2 3 4 5 6 98

D5: Better understanding of cash flow management would assist my clients with their business planning

1 2 3 4 5 6 98

D6: Having a better understanding of cash flow management would reduce my clients stress levels

1 2 3 4 5 6 98

D7: My clients can’t afford to pay to learn about cash flow management.

1 2 3 4 5 6 98

D8: It is not my clients’ job to understand cash flow management

1 2 3 4 5 6 98

D9: Most clients are interested in learning about cash flow management

1 2 3 4 5 6 98



D10: In your opinion, what would be your clients’ top two most preferred sources for obtaining cash flow and financial management information or training? MR (2 responses). (DNRO) An industry association or body 1

A business support organisation in their local community 2

Accountant/bookkeeper 3

A private business education and training provider 4

ATO 5

Other government department – local, state or federal 6


I don’t know 98


On a scale of 1 to 5, where 1 is least preferred and 5 is most preferred, please indicate your clients’ preferred method of building their business and financial management knowledge, including tax and super. Least

preferred Most

preferred Not applicable

Don’t know/unsure

D11: Short face to face seminars

1 2 3 4 5 6 98

D12: Phone consultations 1 2 3 4 5 6 98

D13: Face to face group training courses

1 2 3 4 5 6 98

D14: Online tutorials/training/videos accessible any time

1 2 3 4 5 6 98

D15: Online tools, checklists and calculators

1 2 3 4 5 6 98

D16: Live webinars with question and answer sessions

1 2 3 4 5 6 98

D17: Case studies and examples

1 2 3 4 5 6 98

D18: Emails with important and relevant information

1 2 3 4 5 6 98

D19: Networking events e.g. business breakfasts

1 2 3 4 5 6 98

D20: Small business expos and events

1 2 3 4 5 6 98

D21: Community events 1 2 3 4 5 6 98

D22: Websites 1 2 3 4 5 6 98

D23: Self-guided books/manuals

1 2 3 4 5 6 98

D24: Other (please specify) 1 2 3 4 5 6 98

D25: None of these 99



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Small Business Cash Flow Education Research 2017 …...In 2016, the ATO commissioned a research...

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