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Local business is better safe than sorry

Are we prepared to risk our companies for potential growth? A new survey shows that in troubled times we’d rather be safe than bankrupt.

Only 12 per cent of Australian businesses are prepared to take on above-average or significant financial risk to grow their company over the next six months, suggesting the Australian market could grow stagnant.

The serious cash flow pressures currently exerting stress on local businesses will have major implications on business spending and investment in 2009, according to the Australian Industry Group (Ai Group)’s survey in conjunction with American Express.

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

Unsurprisingly, the economic downturn is to blame, forcing businesses to tighten their belts and look more closely at cash flow.

“The unfolding global financial meltdown is having a significant impact on business cash flows and is forcing businesses to quickly reassess the strategies they have adopted to manage their finances. The only conclusion to draw is that these impacts will have become even more intense in recent weeks,” Ai Group chief executive, Heather Ridout.

The survey showed that some of the key strategies survey participants proposed to safeguard their companies was to cutback on expenses and exert greater control over spending.

And while this seems like the most logical step in the fight against negative cashflow, Ridout reckons this reaction will worsen the country’s slowing economy.

“In order to remain competitive in the current environment Australian businesses feel unable to increase their prices and still maintain their sales and cash flow. This is putting pressure on businesses’ ability to think creatively about their long-term competitive positions,” said American Express vice president of small business services, Rachel Felton.

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