Most Australian small to medium businesses (SMEs) may be unprepared for cash flow pressures and compliance demands likely to result from looming “payday superannuation” laws, according to leading non-bank SME lender Banjo Loans.

The new legislation, set to come into force from 1 July next year, will require employers to pay their employees’ superannuation guarantee at the same time as their wages, which will demand a major shift in the way many businesses manage their payroll, says Banjo Loans CEO Guy Callaghan.

Callaghan believes many SMEs are unaware of the new super regime and face being caught napping.

“The new legislation forces businesses to take even more control of their finances,” Callaghan said.

“They will need to be on top of their cash flow situation at all times to ensure they can continually pay super in line with salary and wage cycles rather than quarterly, as is the case now.”

Callaghan says that with consumer confidence trending down for the past couple of years, many SMEs are experiencing lower-than-forecast revenue, translating directly into tighter cash flow. And the latest economic data isn’t bulging with positive news.

Economic uncertainty has created delays in project commitments, resulting in delays in cash coming into businesses and a general sense of uncertainty in planning, all of which contribute to poor cash flow situations.

While the alignment of superannuation with wages payments will encourage greater financial discipline, awareness and oversight, Callaghan says it also requires businesses to review every expense carefully, identifying which items are 100% necessary to be paid now, and which are not.

“Planning and oversight will be more important than ever,” said Callaghan. “SME owners will need – if they don’t have one already – a good finance person, accountant or bookkeeper to ensure they are right on top of their requirements.”

Callaghan says some SMEs, particularly those with lumpy, seasonal, or intermittent cash flow, may find themselves financially stretched at times during the quarter in order to stay up-to-date with their super payments.

“There will definitely be an adjustment period of managing cash flow for some businesses,” Callaghan said.

Banjo Loans Chief Legal Officer Matthew Boglis says that in a recent review of awareness around the changes, the Australian Chamber of Commerce and Industry found that more than 40% of small business respondents were unaware of the upcoming changes.

“Many SMEs may not have enough time or resources to implement changes to payroll or business processes before commencement,” Boglis said.

“This legislation represents a fundamental shift in the way that SMEs manage their payroll, stiffens penalties for non-compliance and exposes businesses to higher administrative burden.

“SME leaders who are not proactive face substantial compliance and cash flow risks, potentially endangering the future of their business.

“Leaders should ensure that finance, HR and payroll staff are informed well in advance about the new rules to avoid unintended breaches.”

Callaghan says business owners can best prepare by being “100% across all cash flow items including revenue and expenses. Know the timing of each item, be tight around debtor control, and be proactive around necessary short-term expenses.”

“By preparing well ahead of the changeover date and managing cash flow in line with the new super payment terms, SMEs can position themselves for stability.”

Callaghan says Banjo Loans continues to support SMEs navigating these challenges.

“A business loan with Banjo can bridge any cash flow gaps you may have in the short-term. Allowing a business to be in total control of their finances and not be caught short with cash balances for essential expenses such as tax and super, paying creditors, buying stock,” said Callaghan.

To further support businesses, Banjo Loans has increased its Express Business Loan amount to $500,000. SMEs can apply online for loans from $20,000 to $500,000 in as little as 10 minutes.

Banjo analyses required data such as bank statements and ATO history to conditionally approve applicants, with funds available in as little as 24 to 48 hours.