The latest small business survey from CPA Australia said many small firms were experiencing troubles with their cash flows, which effect profit margins.
However, the CPA has a guide, Managing in times of Financial Difficulty, to help ease the pain of small firms during these troubled economic times.
CPA Australia business policy adviser Gavan Ord said owners of businesses need to be more aware of conditions in today's trickier economic environment.
"This survey reinforces the need for businesses to have relatively simple processes in place in order to manage their finances.
"It found that 41 per cent of respondents never prepare cash-flow forecasts and 25 per cent never chased up late payments.
"That could be a recipe for disaster."
Ord said firms had to keep their balance sheets in order so they were better prepared to control their finances, particularly cash supply.
"Cash is fundamental to the operation of a business," he said.
"Even profitable companies may still experience problems if they do not manage their cash flow effectively."
Updated financial records were a key to keeping a firm's cash flow in order, Ord said.
"Financial information and forecasts can also assist small business owners by giving them an early indication a business is heading into financial difficulty," he said.
"It is much easier to rectify financial difficulties if they are identified early."
Other findings of the survey include 39 per cent of small firms do not know the interest rates on their borrowings, 36 per cent borrowed in the past year to survive, while 66 per cent of businesses were were confident about their growth in the next few years.
Ord said many small firms had only traded in the prosperous times of the past decade and need to be better prepared for the economic downturn.
"Good business practices are even more crucial in a tougher business climate," he said.
CPA Australia's checklist has guidance on how to improve business cash flow, balance sheet and profitability.
"The checklist aims to help businesses through times of difficulty, whether that difficulty is due to the broader economic cycle or due to internal factors," Ord said.
"It provides small-business owners with a list of measures to help negotiate difficult periods and to position their business for future growth."
The CPA Australia Small Business Survey comprised 500 small business of up to 20 staff each, and 200 CPA Australia members with small businesses as clients.
