Earlier this year, we asked readers whether Australian SMEs were facing a period of uncertainty. In the wake of a disappointing Federal Budget for many firms and news that late payments were on the rise, it’s easy to see why some business owners may have predicted doom and gloom on the horizon. However, new research has revealed that organisations remain resilient as they head into 2018, with business conditions and confidence rising to levels not seen in several years.
Let’s take a look at the latest data to see how SMEs are performing.
Conditions hit record high in October
National Australia Bank’s (NAB) Monthly Business Survey was perhaps the most encouraging report published recently, with the institution noting that business conditions skyrocketed to a +21 score. The result was a seven-point increase on September and marked the highest level since the survey began in 1997. Business confidence was also high at +8, which is well above long-term averages.
“This is an extremely strong result and of itself would suggest a better-than-expected performance for the economy,” NAB Group Chief Economist Alan Oster said. “Overall, the results from the survey affirm our cautiously optimistic view that Australia may temporarily see above-trend rates of economic growth over the coming quarters.”
Late payments on the decline
Efforts to prevent late payments from crippling SMEs appear to be gaining momentum. The Australian Supplier Payment Code, a voluntary and industry-led initiative designed to ensure small businesses are paid within 30 days of invoicing, seems to be having the desired effect. In September, the average time to receive payment dropped to below 35 days, according to Xero figures. At the beginning of the year, small businesses could expect to wait nearly 39 days before debts were settled.
Dun & Bradstreet data echoed the Xero research, with nearly 64 per cent of organisations paying invoices on time in June this year. This was a notable rise from the 58.9 per cent just one month before.
Businesses optimistic for the future
SMEs aren’t just optimistic about current business conditions – they also have reasons to be confident regarding future performance. The latest Sensis Small Business Index found the net balance of organisations that felt the economy would grow over the next 12 months stood at +16. This is up seven points from the last quarterly survey and the highest result since December 2013.
“Access to finance also improved, with the good news it has become easier for many SMEs to secure loans,” said John Allan, CEO of Sensis. “Of the 12 per cent of SMEs who applied for finance, more than two-thirds were successful.”
Small businesses clearly have many reasons to be optimistic in the current economic climate. However, every organisation should be prepared for the unexpected. To ensure your SME has an effective risk management strategy in place, please contact MGA Insurance Brokers.