Small to medium business owners are diligent when it comes to meeting their superannuation obligations to staff but growing their personal super is ‘not top of mind’, according to Tim Reed, CEO of cloud accounting provider MYOB. He told Dynamic Business that government and big business must play a role in eliminating barriers to owners making super contributions.
Reed referred to MYOB’s latest SME snapshot, which revealed that:
- over a third of owners don’t contribute to their superannuation;
- of those aged 50 years and under, over half (52%) have done no retirement planning;
- while owners believe they will need $1 million to retire comfortably, yet 54% will fall short;
- over half are having to wait longer than six months to be paid by customers; and
- more than seven in ten write off money owed to them.
Unreasonable pay practices
Reed said the findings suggest that an owner’s ability to pay their own super is impacted by cashflow problems such as being forced to wait months for payments from big businesses due to unreasonable practices such as 90-day payment terms.
“Small businesses owners are forgoing their own financial well-being and putting the needs of their business first,” he said.
“They are also burdened by constant cash flow pressures, and this lack of cash can then impact the owner’s ability to pay their own super, as well as other pressing payments including wages and rent.”
Greater awareness needed
Reed said there was a need to raise awareness among small business owners of the importance of regularly contributing to their own super
“It’s easy at the time to keep pushing super to the bottom of the priority list, but then you’re left with a challenge where you don’t have enough time to save what you require for a comfortable retirement,” he said.
“We need to educate owners that it’s critical to put something away, whether that’s superannuation or putting money into an investment.
Big business and government action
Reed urged government and big businesses to put forward an initiative to address cashflow problems facing small businesses, and suggested they implement a ‘national prompt payment protocol’ to ensure small business owners are paid on time.
“As part of our proposal, Australian governments and big businesses would be urged to voluntarily sign up to the protocol and publicly commit to eliminating late payment culture where it exists,” he explained. “For businesses and governments that do sign-up to the Protocol, but fail to abide by the principles, a penalty would be incurred. However, we have seen examples in the UK that whilst these provisions exist, many SMEs remain reluctant to make use of them for fear of damaging their relationship, coupled with the cost of taking a debtor to court. The opportunity for Australia is to generate a culture of good business, where such formal procedures can be avoided.”