Seventy-five percent of Australian SMEs say Payday Super is affecting cash flow, reported in ScotPac’s SME Growth Index Report. The study showed 74% of those firms are ill-prepared for the change and expect cash flow to suffer in the near term.
Payday Super took effect on 1 July, requiring businesses to pay superannuation contributions into employees’ super funds within seven business days of each pay run, instead of making payments quarterly.
David Kirwan, ScotPac’s CFO, said this could put pressure on working capital, particularly for businesses with tight margins or uneven customer payment cycles. “For SMEs operating with tight margins or uneven customer payment cycles, bringing forward those outflows can create a genuine liquidity squeeze,” Kirwan said.
The report found that 83 per cent of SMEs with annual revenue of $1 million to $5 million expect a negative impact on cashflow. In contrast, 64 per cent of businesses with revenue of $5 million to $20 million expect a negative impact.
Around a quarter of SMEs plan to use existing cash balances or equity to manage the change, while 37 per cent plan to use external funding facilities, including payroll funding and invoice finance.
Kirwan advised businesses to model cashflow across multiple pay runs and compare customer receipts with major payments to identify working capital gaps. He also suggested that brokers and advisers could help businesses quantify any working capital shortfall before pressure builds.
