Is the Literacy of Small Business Owners Important for Cash Flow Management?: The Experts’ Perspective

Abstract

Small businesses play a crucial role in the Australian economy in terms of income and employment. Reliance on small business however can be concerning, as many small businesses fail to survive for a period of more than five years. This has been associated with the difficulty that small businesses face in maintaining a consistent cash flow. Research suggests that this may be related to financial and taxation literacy of the small business owner (SBO). Although SBOs have been identified has having a higher degree of financial literacy than individuals, it is unclear whether their level of literacy is adequate to support the management of the cash flow of their business. A continuing large research project investigates the required level of literacy that SBOs should possess to operate a successful business, with particular focus on cash flow management. This article reports expert perspectives of the degree of knowledge that is essential for SBOs in terms of professional financial literacy, computer accounting software literacy (CAS) and business taxation literacy in order to implement effective cash flow management practices.

Keywords: Small Business, Cash Flow, Tax Literacy, Financial Literacy, CAS Literacy

JEL Classification: K34, H25, I22