In its latest survey of small businesses, Small Business Loans Australia asked SMEs how rising interest rates and inflation would impact their cash flow and investment plans before the financial year 2024.
The survey caught data from SMEs of all sizes, from microbusinesses (one to 10 employees) through to medium-sized businesses (51–200 employees) and found that 30 per cent believe it will be more challenging to collect customer payments, while 26 per cent said sales will be more difficult to attract. Just 24 per cent revealed their cash flow will not be impacted.
Businesses in Western Australia were the most concerned about their cash flow while South Australia and Queensland were less worried.
In fact, Queensland businesses appeared to be the most prepared for the changing economic climate, with a third (33 per cent) stating their cash flow would not be impacted by growing interest rates and inflation. This was followed by 27 per cent of South Australian SMEs, 23 per cent in Victoria, compared with 19 per cent and 18 per cent in Western Australia and NSW, respectively.
The survey also revealed that it is microbusinesses that will be most impacted with just 29 per cent forecasting no problematic cash flow issues this financial year. This is compared with 15 per cent of small businesses and 14 per cent of medium-sized businesses that predict they will not have cash flow issues.
As smaller businesses generally tend to turn over lower profits and have less of a financial cushion than big corporations, fewer employees and fewer overhead costs may enable them to maintain cash flow more successfully than their larger counterparts.
Respondents were also asked to specify how much cash flow they need every month to meet all their business expenses. Thirty-nine (39) per cent require $50,000 or more, while one in five (21 per cent) require at least $100,000.
A larger proportion of South Australian SMEs were more likely to require less cash flow to meet their monthly expenses: 30 per cent indicated they required at least $50,000 each month. This was followed by 31 per cent of Queensland SMEs, 38 per cent of Victorian SMEs, and compared with 47 per cent in NSW and 56 per cent in Western Australia.
A significant proportion of microbusinesses require more cash flow to meet monthly expenses: 18 per cent of microbusinesses indicated they needed $50,000 or more each month. This is compared with 78 per cent of small businesses and 91 per cent of medium-sized businesses.
Despite the prediction of less cash flow, the survey also found that less than half (43 per cent) had a strategy in place to mitigate the downturn.
And it was microbusinesses that were pre-planning with 60 per cent saying that had strategies in place to maintain cash flow through tough periods compared to 57 per cent of medium-sized businesses.
Among the most common strategies was delaying or cancelling investments, with 40 per cent of businesses surveyed saying they will delay investments until the economic climate improves, while 15 per cent will cancel investments altogether. Just 17 per cent revealed they will continue with their planned investments, while 29 per cent admitted they had no plans to invest in their business in the first place.
A larger proportion of microbusinesses indicated they had not planned investment for their business, such as new hires, technology or equipment (39 per cent). This is compared with just 9 per cent of small businesses and 6 per cent of medium-sized businesses.
In regard to investment in their businesses, smaller SMEs planned to invest less in their business in the next year: 37 per cent of microbusinesses indicated they planned to invest just up to $10,000, compared with 12 per cent of small businesses and just 6 per cent of medium-sized businesses.
