The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has reported a “moderate lift” in small and medium-sized enterprise (SME) conditions, which marks the first quarterly rise since August 2022.
The latest Small Business Pulse reveals conditions for small businesses improved by 0.1 percent and appear to have “stabilised”, following a rocky 12-month period which saw conditions fall by 0.9 percent.
The recovery is attributed to a number of factors, including a shift towards re-pricing as input inflation starts to ease, which is leading to a longer-term view on margins, cost containment and growth opportunities for small business owners.
ASBFEO Bruce Billson said the Reserve Bank of Australia’s decision to further reduce the target cash rate to 3.85 percent provides a “ray of light” following a “prolonged period of difficult conditions” for small and family businesses.
“Both demand and supply factors are being considered as small business owners consider their margins for continued viability and opportunities for growth,” he said.
“Small business owners are reviewing customer satisfaction, input costs, final prices and ways to increase sales, product offerings and margins. This increasingly includes researching importing and exporting.
“This is widespread, from importing software products and hospitality supplies, to exporting in the retail and agricultural sectors. These enquiries are predominantly about engaging in trade in the Asia-Pacific.”
Billson also touched on the use of technology within the SME landscape, stating that small business owners are turning to artificial intelligence in an attempt to find new opportunities and develop plans.
“This research into artificial intelligence supplements research into digital services including software and cloud computing,” he said.
“Small business owners are considering how these technology tools can support regulatory compliance as well as natural disaster preparedness.”
However, despite the improvement and overall sense of positivity, cash flow challenges still persist and remain a significant concern, with the ASBFEO navigating rising requests for assistance with payment disputes – most commonly within the construction industry and increasingly within the hospitality and disability support industries.
This was reflected in NAB’s recent SME Business Insights report for Q1 2025, which revealed cash flow was the top concern for small business owners (43 percent, up from 34 percent in Q1 2024), particularly for those in New South Wales (46 percent), Victoria (44 percent) and Western Australia (43 percent).
According to the “Big Four” bank, profitability is also keeping small business owners awake at night, but worries about inflation, the cost of doing business, staff turnover and red tape are beginning to ease.
To tackle the challenges they still face, small business owners said they are looking to cut costs where possible and seek better terms with their suppliers (50 percent), while almost four in ten (37 percent) are planning to increase their marketing efforts.
Just over a quarter (29 percent) are reviewing their cash flow and working capital processes, with remaining tactics including investing in new training, talent and people (28 percent), changing pricing strategy (28 percent) and improving customer communications and management (27 percent).
While there is cautious optimism regarding the improvement in SME conditions, ongoing support and attention to the challenges faced by small businesses remains crucial for sustained recovery and growth. How can you help your small suppliers?
