- 66 per cent of small businesses are concerned Australia will experience a recession and 62 per cent believe the severity will be the worst in 20 years.
- 61 per cent of small business owners say COVID-19 has negatively impacted their business
- Two-thirds of SMEs are planning to consolidate or cut costs in the coming year.
- Many small businesses are concerned with their future once JobKeeper payments cease in September.
Following the recent coronavirus crisis, business confidence has dropped by almost half since 2019 according to the ‘Canary in the Coal Mine’ report released by Prushka Debt Recovery today.
The report found business confidence has plummeted to a new low with only 22 per cent of small business owners feeling confident about their business down from 40 per cent 12 months ago.
66 per cent of small business owners are fearful Australia is on the verge of a recession with six in ten believing it will be the worst economic period the nation has experienced in 20 years.
With the government confirming Australia is likely to enter a recession at the end of June, Roger Mendelson, CEO of Prushka, said business owners should be prepared to continue operating in volatile conditions for some time.
“COVID-19 has impacted the health of the global economy and Australian SMEs are feeling the pressure on the bottom line. Over the past 12 months, business confidence has halved, and many SMEs are just trying to stay afloat,” Mendelson said.
“Until now, businesses have had to make tough decisions to survive and, as restrictions slowly begin to ease, there will be new challenges to overcome. Now more than ever businesses should be focused on best and worst case scenario planning, to ensure they have a framework in place that allows their business to operate no matter the circumstances.”
Understandably over half of small business owners surveyed said the pandemic has been the biggest negative impact on their business. This was closely followed by the state of the economy and reduced consumer spending. When asked what their biggest concerns were over the coming 12 months, profitability, managing cash flow and growing their customer base were top of mind.
To mitigate any potential issues with cash flow, 56 per cent of small businesses said they have a cash buffer in place, however, businesses are continuing to rely on personal funds as a temporary measure, a trend which has risen by 16 per cent over the past 18 months.
“It is concerning that SMEs are still continuing to rely on their own funds in times of strife, as this can place pressure on families. Forecasting a business’ cash flow ahead of time can help you plan any expenses around your projected cash inflows and ensure you are adhering to your credit collection processes,” said Mendelson.
Worryingly even though business owners are spending less time chasing payments, 47 per cent of businesses are finding it harder to collect debt, and 53 per cent believe it is harder for debtors to repay debts compared to this time last year.
“While it’s a good sign that SMEs are spending less time chasing debts, it’s still concerning they are finding it hard to collect.
“For SMEs to survive in this new normal, they must be adaptable, flexible, and able to act on decisions quickly. Strong cash flow processes are more important than ever for survival,” Mendelson concluded.
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