By Geoff Scofield, Westlawn Finance MD & CEO
23 June 2016

As the financial year draws to a close, it’s been a busy time for the researchers and number crunchers responsible for gauging the mood of those sitting at the helm of Australia’s small and medium sized businesses.

This month, Commonwealth Bank, Westpac, accounting firm RSM, MYOB and Roy Morgan have all released the results of their research into SME sentiment.

So how do business owners see the current business climate and the outlook over coming months? Well, it’s a mixed bag with sentiment fairly evenly split according to these latest results.

Commonwealth Bank Small Business Study

On 16 June, Commonwealth Bank released the results of its online survey of 500 Australian small businesses with an annual turnover of less than $1 million.

That survey, conducted in May, revealed close to half of Australian small businesses are prioritising investment in machinery, equipment and technology in the new financial year.

It found small businesses with an annual turnover of less than $100,000 are more likely to prioritise a review of their business technology in the new financial year than those businesses with a higher turnover.

Almost half of small business owners feel “confident” and “calm” as the current financial year draws to an end, according to the survey. Fifty percent stated that “reviewing the performance of their business” was their top priority.

Cashflow management was identified as a “major pain point”, with almost one-third of small business owners currently managing cashflow issues by dipping into personal funds. A third of businesses said they don’t use any form of credit facility for business investment, working capital or cashflow.

Is cashflow a “pain point” for your business? Read our tips on managing cashflow here.

In terms of succession planning, the survey found small businesses aren’t adequately prepared. While 57% expect their operations to continue after they exit the business, two-thirds currently have no succession plan in place. Sole traders are least likely to have a plan at 74%, while 60% of sole traders expect the business to close upon their exit.

Here are some pointers on developing a sound succession plan for your business.

June Quarterly Westpac-Melbourne Institute SME Index

Meanwhile, the June quarterly Westpac-Melbourne Institute SME Index has found that business activity, sales, profits and employment levels have declined from the previous quarter. Almost half of SMEs surveyed reported a rise in overheads and costs.

SMEs are, however, more optimistic in their assessment of future conditions than in their assessment of current conditions. In particular, the index found female business owners and managers are more confident (106.6) than their male counterparts (89.7) about business conditions in the next 3 months.

The SME Index also found nearly 1 in 5 SMEs (17.3%) spend over 40% of time on internal business administration each week. Further, 84.6% say they manage the majority of tasks such as book keeping and payroll through software tools or apps.

Some good news out of this study is that internal administration is becoming increasingly manageable with technology, and SMEs are pushing to automate elements that work together to ensure efficient production.

Westpac also surveyed some of its own business customers and found almost three-quarters said investing in technology has had a positive impact on their bottom line. Almost half plan to implement technology solutions in their business over the next 6 to 12 months.

Find out how Westlawn rental finance can help your business invest in the latest technology.

On the release of the June Quarterly SME Index, Westpac Senior Economist, Matthew Hassan, said he sees some relief ahead for SMEs.

“While competitive pressures are likely to remain fierce, the RBA’s May interest rate cut should give some support to demand. The Federal Budget also introduced a range of measures directly aimed at supporting SMEs, including a company tax cut from July 1.

“With the RBA expected to cut interest rates again in coming months, SMEs should see at least some improvement in their bottom lines. Whether that is enough to tip the balance sentiment-wise remains to be seen.”

SME survey by accounting firm RSM

Another survey of SME owners out this month is from accounting firm RSM.

That survey found a slight rise this year in the percentage of business owners expecting to grow over the next 12 months (69% compared with 68% in 2015 and 64% in 2014).

Actual growth over the last 12 months hasn’t exactly matched expectations though with 49% of SME owners reporting actual growth over the last 12 months. This percentage was in line with 2015 and up 3% from 2014.

RSM stated that: “Overall, these growth predictions from SMEs are more bullish than expected. This is probably being driven by the low-yield, low-interest rate environments globally, which mean that businesses can borrow to expand with a very low cost of servicing the debt.”

If you’re looking to expand your business by taking advantage of the low interest rates currently on offer, call us on 1300 WESTLAWN (1300 937 852).

MYOB Business Monitor survey

From the latest MYOB Business Monitor survey, less than half of the 1,000-plus SME respondents (42%) feel the economy will decline over the next 12 months.

Respondents stated their biggest concerns as being:

  • Cash flow problems
  • Competitive activity
  • Fuel prices
  • Attracting new customers, and
  • Profitability and price margins.

Not surprisingly, new SMEs are more optimistic. Nearly half expect to see financial growth, including 49% of start-ups, 41% of new businesses and 47% of new franchisors.

Roy Morgan Monthly Business Confidence Index

Finally, from Roy Morgan, their latest business confidence index has recorded a fall of 9.1% in May, down from 123.1 points to 111.9. May’s fall, however, follows 3 consecutive months of increases recorded up to April where business confidence was sitting above its 5-year average.

Contact us

To find out about investing in new technology through rental finance, or to take advantage of the low interest rates currently on offer, speak to a Westlawn Business Finance Specialist today by calling us on 1300 WESTLAWN (1300 937 852).

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