?Is technology a risk or an opportunity for a small business?

March 15th, 2016

 

For decades, businesses of all shapes and sizes have been able to use technology to do things they never before thought was possible. Whether it's setting up a private cloud platform, automating accounting processes or extending their marketing reach via the internet, the options are seemingly endless.

The Australian Communications and Media Authority (ACMA) says that small to medium-sized enterprises (SMEs) are more likely to take up new technologies than their larger counterparts. Their versatility as small companies makes innovation generally easier to implement and it can help them be more competitive in what's often a gladiatorial business arena.

However, let's not forget how expensive new technologies can be. ACMA also notes that on top of the purchase cost of any equipment, SMEs commonly struggle to budget staff training and ongoing expenses. Technological innovation is a great opportunity, but also a substantial financial risk.

Technology, risk, SMEs, opportunities, Australia, debtor finance, invoice finance
Technology is an incredible opportunity for SMEs, but they need to plan for it.

Splash the cash with no financial contingency plan, and you could find yourself like Icarus, flying too close to the sun and just waiting for your wings to melt.

Financial challenges

Somewhere in the region of 46,000 businesses failed in 2015, and the third-quarter of the year proved to be the most risky, according to Dun & Bradstreet (D&B). Research shows that Q3 featured the highest business failure rates in Australia for two years, as 13,615 companies folded.

When we consider that the majority of companies who close their doors for good do so because of inadequate cash flow and poor capital management, financing expensive new assets requires deep consideration - no matter how crucial these investments might be.

Splash the cash with no financial contingency plan, and you could find yourself like Icarus, flying too close to the sun and just waiting for your wings to melt.

Adapting to the technological world

Much like ACMA, Commbank suggests that SMEs who take the time to understand new technologies and implementation methods have a greater chance of getting it right.

"The more knowledgeable and confident SMEs become about digital communications technology, the easier the path to adoption becomes," Commbank explained in a recent SmartCompany article.

It also pays to look into methods for funding the ongoing costs of being tech savvy and innovative. Technological purchases are often expensive, take some implementation time and require staff training to make the most of them.

Whenever businesses need to spend capital, invoice finance can be a big help. With quick approval and no debt obligation, a debtor finance provider can get funds to you in a matter of days (or even hours), without having to put up any other assets as collateral.

Technology, risk, SMEs, opportunities, Australia, debtor finance, invoice finance
Your business invoices can be a safety net to keep your technology expenditure from getting out of hand.

It takes an average 44.1 days for your debtors to settle up and pay their invoices.

The power of your unpaid invoices

In Australia, it takes an average 44.1 days for your debtors to settle up and pay their invoices, according to D&B. While that's a fair improvement on the past, is it quick enough? It could leave you awaiting payment for around two months for a product or service you have expensed, produced and delivered. In the fast-paced modern world, that can be a lifetime.

Debtor finance drastically speeds up this time, meaning businesses have more capital to spend and can budget for emergency or urgent outgoings.

What else it does is provide more security from debtors defaulting. The other side of those business failure statistics is that it is more likely to happen to those who owe you money than to your business itself.

When your debtors don't pay you in full before entering administration or liquidation, you may be left with only legal action as a recourse. While debtor finance does not account for the money owed to a financier if a client goes under (it will still be owed unless they have trade credit insurance), if you can resolve any outstanding invoices quicker in the first place, you may be left less exposed to risk.

Technology is changing our lives and giving SMEs a real reason to be excited about the future. However, small businesses need to be careful not to let their enthusiasm lead them down a path of financial risk.

Plan for the future, use your debtor finance facility to full effect, and you could find yourself truly riding the wave of technological revolution.

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