Calm waters: GST and cash flow stability for small businesses in Australia

Small businesses are seen as vital to the Australian economy. However one particular issue of concern is the stability of their cash flow which can be exacerbated by the unpredictability of the markets, management practices, availability of financing and taxes, such as the goods and services tax (GST). This article reports a multiple case study of small (including micro) businesses which explored how the interaction with the GST affected small businesses' cash flow stability. Findings suggest that the cash flow stability of small businesses may be adversely affected when trading with retail consumers due to an inability to pass on the GST. Also, businesses trading with other businesses appear to face problems due to late payment by debtors. A common issue in supporting cash flow stability appears to be a lack of sophisticated cash management practices.