Australian Small Businesses Are Worried About Impending Recession According to New Survey

Emilly

, Business

Small-Medium-Enterprises (SME) in Australia is a bit worried about the possibility of an economic recession prompted by the COVID-19 pandemic. As a result, business confidence has dropped to an all-time low. The nationwide concern over a financial slump has seemingly been confirmed via a recent Prushka Fast Debt Recovery SME survey. 

The bi-annual survey provides a lot of insight into the current mindset of small business owners. In addition, Prushka Debt Recovery released a list of actions business owners can perform to proactively prepare for a winding down of commerce through the end of 2020. 

For instance, small businesses should prepare for the possibility of a recession by reviewing fixed costs, like public liability insurance and other coverages. SMEs can review their entire business insurance portfolio to make sure they’re paying the best price for the best coverage available. 

By visiting the BizCover website you can do an instant online comparison, small business owners can go online (or over the phone) quote of their public liability insurance and review coverage benefits. This is a proactive step that can be taken, among many others listed in the Prushka press release. 

‘Canary in the Coal Mine’ Financial Survey for SMEs

The twice per year survey of around 500 Australian small business owners revealed only 22% were confident in the condition of their company at this time, and less than one third are planning for growth over the next 12 months. More than two-thirds of the entrepreneurs are planning to cut costs or consolidate debts. 

The global pandemic has prompted nearly 66% of small business owners are a bit troubled by the possibility that Australia will find itself in a recession. Beyond that, 62% of SMEs believe the seriousness of Australia’s future financial crisis could be the worst the nation has experienced in the last two decades. 

Financial experts are encouraging small business owners to prepare to operate in a volatile and uncertain economic environment for a while, with recent federal government announcements confirming the country will most likely enter a recession this winter. This will be the first fiscal crisis in more than two decades. 

Most SMEs admitted in the survey that Coronavirus negatively impacted their business in the past 12 months. In addition, business owners believe the overall state of the economy and reduced consumer spending has hurt their operations. Prushka survey participants noted managing cash flow, growing their client base, and overall profitability were other major concerns. 

Australian SMEs Worry About the Cash Flow Crunch

To lessen any cash flow issues, 56% of Australian SMEs say they established a cash buffer. Unfortunately, many small business owners rely on their personal funds as a temporary solution or quick fix when the business notices a lag in revenue. In fact, entrepreneurs relying on their own personal bank accounts and credit cards is a trend that’s increased by 16% over the last 18 months. 

Recently the Australian Securities and Investment Commission’s annual report proclaims that most SMEs go out of business because they can’t pay their debts. The report further disclosed that 80% of companies closed with less than $100,000 in assets.

Recently the Australian Securities and Investment Commission’s annual report proclaims that most SMEs go out of business because they can’t pay their debts. The report further disclosed that 80% of companies closed with less than $100,000 in assets. What could be prompting this? 

On the one hand, almost two-thirds of small companies spend less than 5 hours each month chasing unpaid customer debts. Over the last 18 months, these statistics have increased by 20 percent. However, this isn’t necessarily a positive sign. That’s because 47% of all businesses are finding it more difficult to collect a debt. Perhaps this is because 53% of debtors are struggling to repay their debts compared to this time last year. 

So, maybe SMEs aren’t bothering to chase down their outstanding debts because they already know the customer doesn’t have the money to settle the debt. This doesn’t sound like a good sign of things to come. Many Australian economic advisers suggest that, for small businesses to survive, they must be flexible, adaptable, and make quick decisions. Being sure their companies have tight collections and cash flow procedures will help them make it through bumps in the road. 

Checklist for SMEs Trying to Prepare for an Economic Downturn

As we mentioned above, SMEs should review their operational costs, like public liability insurance. Below is a checklist of other proactive steps small business owners can take today to keep their company afloat tomorrow. 

  • Concentrate on completing current projects/orders and billing them rather than new projects/orders.
  • Assess your business account now and decide if you need support from a local or nontraditional lender, perhaps a business loan for capital costs. Don’t waste time. 
  • Reach out to clients that are past due on the payment. Get a commitment from them to pay their debt. 
  • Defer any purchases, like new equipment and extra supplies, until next year if you can.
  • Review written off customer accounts and refer those old debts to a collection agency right away.
  • Invoice your customers right away, before there’s a chance they go out of business. 
  • Offer future discounts on your services or products for those clients that pay timely.

It’s a good idea to put together a sound plan for your small business so you can avoid running into any unnecessary cash flow problems. This is always a good idea but particularly important as Australia faces a possible recession caused by the COVID-19 pandemic.