SMEs are often described as the backbone of the Australian economy. They comprise a staggering 99.8 per cent of businesses in the country, according to the Australian Bureau of Statistics, while contributing more than 55 per cent of total industry value.

This data shows SMEs really are a key driver of productivity for the nation. But recent research indicates these organisations may be facing a period of uncertainty.

Business confidence and conditions decline.

The latest National Australia Bank (NAB) Quarterly SME Survey for June showed a substantial drop in optimism and business conditions.

NAB’s confidence index slumped from +11 in the March quarter to +5 over the last three months, with the smallest businesses taking a heavy hit, plummeting from +9 to -3. The decline in conditions was less severe, dropping from +9 to +7, but low-tier SMEs with revenues of between $2 million and $3 million again suffered the biggest losses.

“Whether this worsening in conditions for SMEs is the start of a renewed downward trend or a temporary pull-back remains to be seen,” said Alan Oster, NAB chief economist.

Late payments on the rise

Unpaid invoices can have a devastating impact on SME cashflow, and Dun & Bradstreet (D&B) figures show late payments have become more common in Australia this year.

Less than 60 per cent of businesses pay their bills on time, with the average late payment arriving 15.3 days after the invoice terms. Large organisations are the biggest culprits, paying 19.4 days late on average.

“There is an established trend that larger firms (over 500 employees) are the slowest to pay invoices, while smaller firms are the fastest,” stated Stephen Koukoulas, D&B economic adviser.

Federal Budget disappointment

Nearly three months have passed since the Federal Budget was handed down in May, and SMEs have shown a fairly lacklustre response, despite several pledges aimed at boosting smaller businesses.

62 per cent of SMEs said they expect Federal Budget changes to have no effect on their business performance over the next 12 months.

The Budget proposed a planned reduction of the corporate tax rate to 27.5 per cent, as well as a one-year extension to the Australian Taxation Office’s $20,000 instant asset write-off scheme.

However, 62 per cent of SMEs said they expect Federal Budget changes to have no effect on their business performance over the next 12 months. The remaining respondents were equally split between whether it was positive or negative news.

Clearly, SMEs are facing headwinds in 2017, as business confidence, conditions and late payments have an impact, while response to Federal Government support is muted.

Contact MGA Insurance Brokers today to discuss how we can help your SME prepare for periods of uncertainty, now and in the future.