Small business confidence in reverse: Report

New research reveals a significant setback in business confidence among SMEs, with more than half believing an economic recovery is more than 12 months away, compared to 37% a year ago.

According to the MYOB Business Monitor, a nationwide survey of 1,000 small business owners, 35% of business owners expect revenue to be about the same in 12 months time.

MYOB chief executive Tim Reed says business owners have been hit by a “triple whammy” of interest rate hikes, higher fuel costs and the ongoing uncertainty over tax reforms.

“Add likely interest rate rises, a flood levy, carbon tax and increased superannuation guarantee on the horizon and you can appreciate why their confidence has taken a hit,” he says.

It seems the recent spate of natural disasters is also likely to impact on future business performance, with more than half of those surveyed expecting the Queensland and Victorian floods to have an impact on their business over the next 12 months.

Meanwhile, 37% of respondents believe fuel prices will put extreme pressure on their business in the year ahead, while 30% believe interest rates and cash flow will put pressure on their business.

Reed has called on the Government to “break the shackles” of Australia’s two-speed economy to avoid it becoming “stuck in neutral”.

“That means introducing a lower small business tax rate that is available to all businesses regardless of their business entity structure, simplifying the BAS reporting requirements, and increasing access to business finance to help fuel growth,” he says.

Despite businesses’ cashflow concerns, the survey shows 38% of small business owners plan to make their business as environmentally sustainable as possible in the future.

“While business owners are divided on the importance of the proposed carbon tax, the issue is nevertheless an excellent example of how – by providing business owners with certainty on environmental legislation – SMEs can plan for it and adapt to the new business conditions,” Reed says.

Meanwhile, new findings from Dun & Bradstreet show business-to-business payment terms have reached three-year highs as businesses struggle to manage their cashflow.

Dun & Bradstreet’s Trade Payment Analysis report, which details findings from the March quarter, reveals average payment terms have risen to 55.6 days; the slowest rate of payment in three years.

The report reveals small businesses have recorded one of the worst results, with average payment terms for small firms – with one to five employees – jumping from 51.5 days in the December 2010 quarter to 56.6 days in the March 2011 quarter.

Damian Karmelich, Dun & Bradstreet director of corporate affairs, believes the deteriorating payment terms signal executives’ lack of attention with regard to cashflow management.

“As the economic outlook improved [after the global financial crisis], firms have reduced their focus on credit risk and cashflow management, resulting in payment terms deteriorating and business failures rising,” he says.

“This is an important reminder of the importance of business fundamentals regardless of how good the economy may be.”