(21 June 2022 – Australia) The majority of small businesses are concerned with increased wage costs affecting their bottom line, according to the latest SME Growth Index by prominent small business financier ScotPac.
Three out of four larger SMEs (A$5m – A$20m revenue) directly interviewed by East & Partners for the longest continuously running SME research program reported rising wage costs as the top concern that could prevent them from hitting revenue targets. 68 percent of smaller SMEs (A$1m – A$5m revenue) expressed similar sentiment on the back of the Fair Work Commission (FWC) lifting the national minimum wage by 5.2 percent (A$40 a week). This level of wage growth broadly fell in line with expectations for the post-COVID operating environment after enterprises experienced significant labour market disruptions from 2020 to 2021.
Rising interest rates were the #2 concern, with 45 percent of SMEs worried about the effect of higher borrowing costs. Other concerns that SMEs expected to hurt their businesses included rising fuel prices (30 percent), higher energy costs (27 percent, regulatory and compliance costs (27 percent), logistics fees (25 percent), insurance fees (17 percent) and rising commodity prices (13 percent).
Small businesses wanted the government to extend the accelerated depreciation scheme (24 percent), cut company taxes deeper (18 percent) and simplify Business Activity Statement (BAS) and regulatory requirements (18 percent).
“Despite these concerns, SMEs have reported a higher level of confidence in their economic outlook for 2022 and they would be looking to the federal government for support to confront these challenges. With the inflation rate of 5.1 percent at a 20-year high, it’s clear that rising cost impacts represent a genuine threat to SMEs achieving their targets this year” ScotPac CEO Jon Sutton said.
“That will inevitably put additional pressure on business cashflow as SMEs grapple with rising cost impacts and delays in passing these costs through to their customers. SMEs should carefully consider various solutions to finance their cashflow requirements in this environment, including invoice finance and business loans” Sutton added.