How are SMEs coping with supply chain problems?

One in two small to medium businesses are “very” or “extremely” likely to increase their use of Australian suppliers and four in 10 would choose to support new local start-ups, new NAB research shows.

Global supply chains have been heavily affected by the pandemic over the last few years and have been further affected by factory closures, rising freight rates and the war in Ukraine.

NAB surveyed 760 SMEs and asked about the impact of supply chain disruptions on their business and what they thought Australia should do to deal with future supply chain issues.

It found that for 26% of SMEs, supply chains were a “significant” issue for their business in the past three months. However this was down from 31% from Q2 2022. Meanwhile, 24% of SMEs also believe supply chains would remain a significant issue in the next 12 months, down from 31% in Q2.

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The number of firms who reported “significant” issues was lowest in the finance and insurance (5%), property services (6%) and health (7%) sectors.

NAB said investing in Australian-based manufacturing was also widely seen as a way of addressing supply chain issues – either through businesses establishing their own new manufacturing facilities, increasing their use of Australian-based suppliers and supporting new Australian-based manufacturing start-ups.

Daniel Green (pictured above), winner of the Westpac Australian Broker of The Year award at the 2022 Australian Mortgage Awards and director of Brisbane’s Green Finance Group, said he was helping his clients deal with ongoing supply chain issues and the rising costs of building materials.

“As brokers, the first step is making sure clients understand the business’s current operating cycle which seems straightforward, but often small business owners in this sector are literally on the tools and very much caught up in the day-to-day running of things,” Green said.

“Commonly incremental changes to the cycle length culminate, which impact cash flow and takes them by surprise in a big way. Once the current operating cycle is determined, we can review workable cash flow solutions such as a trade finance or debtor finance facilities depending on the situation.”

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Green said he also recommended that SME clients work closely with their accountant to understand all key business performance metrics including tax saving opportunities and profitability measures.

“This ensures we are all on the same page when it comes to establishing better cash flow options,” he said. “Don’t hesitate or put your head in the sand because this ongoing supply chain issue isn’t going away by itself.”

Green said talking with a broker who could look at SMEs’ current finance packages with fresh eyes was a great idea.

“A broker is in the best position to establish whether more suitable finance options can be negotiated with your existing bank or whether there is a better fit out there with an alternative lender,” he said.

“It isn’t just a question of the best interest rate. You need someone who can objectively review loan structure, loan product and pricing and secure a complete package that astutely maximises cash flow options. Your broker will also be able to negotiate on your behalf and leverage the offering from one lender to another where necessary.”