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Financial literacy needed to underpin growth

For Immediate Release

More Than Half New Businesses Failing In First Three Years
Financial literacy needed to underpin growth

Lack of financial skills is behind two out of every three businesses which fail, according to Westpac’s Business Banking general manager Bruce McLachlan. “Data from Statistics New Zealand indicates that 53 percent of small to medium-sized enterprises (SME) fail within the first three years. Research suggests that two-thirds of business collapse is due to financial difficulties associated with poor financial management.”

Poor financial literacy is hindering business and economic growth, he says. “We are one of the world’s most entrepreneurial countries, ranking sixth out of 37 countries on the recent Global Enterprise Monitor (GEM) report. Flexible and innovative SME are the lifeblood of the economy, with 82 percent of businesses employing five or fewer staff, yet the high rate of business failure from financial problems is the Achilles heel of our business growth.”

The success rate and growth of New Zealand companies will improve if business managers and owners gain greater financial skills, he believes. ”Most people in business lack training in accounting and finance. Failure to plan, monitor financial position and manage cash flow and borrowings is leading to otherwise innovative businesses collapsing.”

He says people in business often have a blind spot when dealing with the company’s finances. “Typically the person who set up the firm may be good at their trade or profession, and may be multi-skilled in managing production, human resources and marketing. However many owners and managers lack the financial skills to properly monitor their financial situation and make sound financial decisions.”

He says recent government initiatives to foster business growth and a culture of enterprise will assist new businesses. “Increasingly banks are providing not just finance, but mentoring, business intelligence and advice throughout the business lifecycle. Banks are helping people in business read between the lines, and understand the bottom line, so businesspeople can get on with growing their business, whether they operate from their garage, are a new franchise, or are a corporation listed on the stock exchange.”

Efforts are being made to bridge the ‘entrepreneurial gap’ between good business ideas and long-term sustainable businesses, he says. “To increase New Zealand’s business success rate, last year Westpac launched Beyond Survival, a two-day business course for time-pressed SME business owners and managers. Financial knowledge can make the difference between struggling and succeeding.”

The intention is not to teach people how to run a business, but to highlight the common pitfalls and pass on practical financial tools to measure and improve business performance, he says.

Owners and managers from a variety of businesses - from service and food industries to fashion designers - have taken part in the first seminars. “Many participants have said it is the best seminar they have ever been to, and some have suggested it should be compulsory for start-up businesses.”

Beyond Survival is being offered again in 2003 throughout New Zealand, he says. “New Zealand is a nation of small and medium enterprises. We want to help ensure businesses have the best chance of success, and that New Zealand’s economy doesn’t just survive, but thrives.”
ENDS

People wanting to register or find out more information about the Westpac Beyond Survival Seminars can call 0800 177 127.

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