Australian small businesses are struggling to stay afloat as economic pressures persist, with 22 percent completely out of cash reserves, according to new research from Prospa.
The small business lender commissioned YouGov to conduct the study of 500 business leaders, which also revealed that 18 percent of SMEs have less than a month’s worth of expenses left, followed by 21 percent who predicted they have one to two months in reserve.
“The current economic conditions are such that small businesses are moving further away from the three to six months’ cash reserves recommended to cover operating expenses,” said Prospa co-founder and chief revenue officer Beau Bertoli.
“We’re seeing a particular strain on the retail and hospitality industries, which have been disproportionately impacted by a decrease in discretionary spending, supply chain cost increases and rising fuel and energy expenses.”
Further shining a light on the dire situation, 77 percent of business leaders and decision makers said they already have or are likely to adopt strategies over the next 12 months to manage the impact of rising costs.
This may include reducing non-essential expenses (43 percent), increasing their prices (38 percent), switching to lower cost suppliers (19 percent), increasing support for technology adoption (17 percent) and reducing operating hours (11 percent).
“Technology will be a crucial lifeline for small businesses as they map out their cashflow over the coming months. Streamlining manual backend tasks and harnessing technology to create admin efficiencies will have a direct impact on the productivity – and therefore profitability – of the business. Our data shows business owners know this too and they’re taking the bull by the horns to ensure they not only survive but thrive in the current climate,” Bertoli said.
Nearly half of business leaders (46 percent) said they had reduced their own income in an attempt to stay afloat, while 31 percent had used their own personal savings to pay business related expenses.
Highlighting the toll on mental health, 44 percent of business leaders reported stress or burnout due to the pressures they are facing, as nearly a third (29 percent) said they have less time to spend with family and friends due to rising costs and the challenging economic environment in which they are operating.
“While Australia’s small-business community has jumped hurdle after hurdle in recent years, the current economic environment is raising the bar higher than ever before,” Bertoli added.
“With cash reserves down, and the personal impact becoming increasingly evident, it’s critical that businesses assess the financial support available to them and access what they need to put themselves back in the race.”
