New research from YouGov, commissioned by Australia’s leading online small business lender, Prospa, reveals a depleted runway of cash reserves amongst Australia’s small business community. Forebodingly, over one in five (22 per cent) SME leaders surveyed say their business currently has no cash reserves at all. Others are worryingly close behind with 18 per cent reliant on less than a months’ worth of expenses, and 21 per cent predicting they will run out in just 1-2 months.

While the RBA’s decision to pause rate increases in May was a welcome relief to SMEs struggling to make ends meet, the warning of further increases later this year means businesses must prepare financially.

“The current economic conditions are such that small businesses are getting further away from the three to six months’ cash reserves recommended to cover operating expenses,” said Beau Bertoli, Co-founder and Chief Revenue Officer.

“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”, Beau continued.

Australian SMEs demonstrate resilience once again

Yet while the future may appear bleak from the outside, Australian business leaders are proving their resilience to adverse market conditions once again by taking a solutions-first approach.

Overall, more than three in four (77 per cent) Australian business owners and decision makers say their business already have or are likely to actively adopt strategies in the next 12 months to manage the impact of rising costs. While over two in five (43 per cent) plan to reduce non-essential expenses and 38 per cent are likely to increase their prices in the next 12 months, nearly one in five (17 per cent) of metro-based businesses cite an increased support for technology adoption.

“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,” said Beau.

The financial hit becomes personal

However, the hard work and sacrifice made by SME leaders has steadily begun to impact their finances and lives on a personal level, with over three quarters (77 per cent) feeling the squeeze.

As the business purse strings tighten, so too does the personal wallet as nearly half (46%) say they have reduced their own income, and a further 31 per cent have had to dip into their personal funds to pay business expenses. Yet despite switching or likely to switch in the next 12 months to lower-cost suppliers (19 per cent), reducing their pay or bonus (12 per cent), and even reducing their operating hours (11 per cent), undeniably the great toll taken is on the SME leader’s mental health. A huge 44 per cent note increased stress or burnout and nearly a third (29 per cent) cite less time to spend with friends and family due to rising costs and a challenging economic environment.

“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. 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,” said Beau.

Methodology

This study was conducted online between 11th – 17th April 2024. The sample comprised a nationally representative sample of 506 Australian business owners and primary decision makers of businesses with fewer than 50 employees. YouGov designed the questionnaire (in consultation with Prospa). Following the completion of interviewing, the data was weighted by business size and location, and the sample is representative of the Australian population aged 18+ who are business owners/ primary decision makers of businesses with fewer than 50 employees (approximately 2.3 million Australian adults). All figures, unless otherwise stated, are from YouGov Plc.