Business conditions enter negative territory
Friday, November 12, 2010/
Conditions for small businesses hit their lowest level in the September quarter since June 2009, according to a new NAB survey.
The survey shows business conditions among Australia’s SMEs fell by two points and are now in negative territory at –1 point.
According to the survey, business services was the best performing SME sector, followed by finance and health.
SMEs moderately outperformed their larger counterparts in finance, which NAB economist John Sharma attributes to the increasing popularity of smaller lenders.
However, SMEs significantly underperformed in transport, accommodation, property services, retail and construction.
“Overall, if you look at it sector by sector, retail and property services were the two weakest. Construction also fell considerably this time,” Sharma says.
Finance recorded the best cashflow position, followed by accommodation. Business services, health, and manufacturing also recorded positive cashflows.
Construction, retail and transport recorded very weak and poor cashflows, as did wholesale and property services.
For SMEs in the lower turnover brand, the profit outlook is best in transport, finance, accommodation, business services and health.
According to the survey, SMEs are most concerned about cashflows and borrowing costs, which Sharma believes is a combination of rising interest rates and low credit access.
SMEs are also concerned over a lack of demand, economic uncertainty, taxation and government policy, and staffing difficulties.
Sharma says with regard to government policy, small businesses are particularly worried about recent announcements by the Australian Tax Office to crack down on debt collection and GST reporting.
Going forward, Sharma says SMEs are confident but not as confident as the larger businesses.
“They should improve their day-to-day management and their cashflows, and be a bit smarter about marketing,” he says.
“Have a combination of marketing techniques and operational efficiencies as well as more stringent cashflow management.”
“Try and be more nimble and read your market better to see what products consumers are using. If consumers are shopping on the web, create more web-based applications.”
“Be more flexible and know your customer well. I know it’s very simple but many businesses don’t do it.”