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Growth limited by cash flow crisis

Thursday, 4 Dec 2008 ( #389 ) - Brisbane, Queensland, Australia
Local News Story
Business investment into 2009 will be seriously affected by current cash flow pressures.
Business investment into 2009 will be seriously affected by current cash flow pressures within the Australian industry.

According to a new national business survey conducted by the Australian Industry Group and American Express, only 12% of Australian businesses are prepared to take on above-average or significant financial risk to grow their company over the next six months.

Small, medium and large-scale enterprises cited cash flow difficulties, profit margin downgrades, and uncertainty over tax breaks as their key concerns.

"Regardless of business size, managers have major concerns about the impact of the worsening economic conditions on cash inflows from sales. In turn, they are apprehensive about the effect of a slowing economy on their overall cash flow outlook and their ability to pay their bills on time," says Australian Industry Group chief executive Heather Ridout.

As a result, companies are focusing on a more aggressive approach to pursuing accounts receivable; cutting back on expenses; exerting greater control over spending and delaying expenditures where possible.

"While these strategies are sensible, and indeed may be essential for each individual business, they point very clearly to one of the ways the slowdown is likely to spread across the economy. With businesses tightening and delaying their own expenditures – both in response to and in anticipation of reduced receipts – an ongoing reduction in confidence and the expectation of a slowdown can quickly become self-fulfilling," says Ridout.
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