Cash flow pressures rise; agribusiness & manufacturing do it especially tough
Australia’s largest accounting software provider reveals the business performance outlook and economic confidence of small to medium business operators (SMEs) has fallen in the past six months. This is particularly the case within the agriculture, forestry and fishing sector and the wholesale and manufacturing sector.
The result comes despite the majority of respondents overall reporting increased or stable revenue for the last financial year and over one quarter reporting more sales/work than usual in their short-term pipeline.
The August 2013 MYOB Business Monitor Report surveyed 1,022 SMEs one month prior to the election, the latest survey in a series that has run since 2004. Less than one quarter expect the domestic economy to improve within 12 months (23%), down from 25% in the March 2013 report. The proportion expecting an improvement to take one to two years is now 35%, down from 37%. Tellingly, the proportion who think it will take over two years is now 26%, up from 22%.
The dip in economic confidence corresponds with a dip in revenue expectations for this financial year. Only one quarter - 25% - are anticipating a revenue rise, down from 30% six months ago. 22% are expecting a fall (up from 19%), 44% are expecting revenue to be stable (up from 42%) and 9% weren’t sure (slightly down from 10%).
The agribusiness sector stood apart as the least positive in an economic sense, with only 13% of business operators expecting an improvement within one year. The manufacturing and wholesale sector was the least positive about its revenue performance for this financial year, with 35% of operators expecting a revenue fall.
MYOB CEO Tim Reed says, “We hope to see a boost in SME confidence now the election verdict is in, but our research suggests it will be a slow road to significant improvement in the health of our economy and our business outlook.
“The financial confidence of the country’s small to medium business operators is closely linked to the health of our economy and it is telling us a clear story. They see factors at play such as record-low interest rates and although many welcome the upside, they recognise it as a sure sign the domestic economy is experiencing slowed growth.
“Political uncertainty in the lead up to the election was likely a strong influence too, with 26% of SMEs saying they didn’t trust any political party more than the other to appropriately manage the economy. Another likely influencing factor is operators having a more realistic picture of their finances after financial-year end.”
On par revenue results and next quarter’s work pipeline
Overall, revenue results were on par with the March 2013 report - two fifths of respondents reported steady revenue when asked to look back over the past year (40%), a little more than those who saw revenue decline (39%). The proportion who experienced a revenue rise was unchanged from the two prior reports (18%).
Manufacturing and wholesale industry operators were hit hardest, with 54% experiencing a revenue fall. This was closely followed by operators in agribusiness, forestry and fishing (53%). The finance and insurance industry was the most likely to see a rise (30%) while the ‘other industry’* category was the most likely to see steady revenue (50%).
Of the mainland states, Victoria and Western Australia were most likely to see revenue rise (21% and 20%) followed by New South Wales (19%). Western Australia was also the most likely to have steady revenue (43%) and least likely to report a fall (34%). South Australia was the most likely to see revenue fall (49%).
Over one quarter of the SMEs surveyed reported more work/sales in their pipeline for the next three months than anticipated (28%). 43% reported an expected pipeline, and 27% saw less work than expected. This was on par with the March 2013 report, at 30%, 41% and 28% respectively.
Cash flow pressures rise while agriculture, forestry and fishing feel the heat
Fuel prices was the top pressure point for SMEs, as it has been since March 2011. Cash flow rose to second from fourth place, equal with price margins and/or profitability, which rose from third place. Attracting new customers dropped two places to fourth, while competitive activity dropped one spot to fifth. The biggest mover of all the 13 pressures listed was interest rates - dropping from sixth place to ninth in this survey.
Of all the industries, operators in agriculture, forestry and fishing felt the most pressure from fuel prices, cash flow and price margins and/or profitability. Of the mainland states, Queenslanders felt the most pressure from fuel prices and price margins and/or profitability, while South Australians felt the most pressure from cash flow.
Australian Chamber of Commerce and Industry Chief Executive Peter Anderson agrees that many of the same pressures face businesses regardless of sector and location, saying the Small Business. Too Big to Ignore campaign aims to assist.
“Firstly, cut down on the red tape - we have specific examples of where that should occur,” he says. “Secondly, simplify the tax system; it’s a system which is actually beyond the comprehension of even professionals in the field let alone small-business people who are required to comply. Thirdly, make it easier to employ people. And finally, build better infrastructure because small-business people are part of local communities and they work inside infrastructure which needs to be as supportive to their economic needs as it does to individuals.”
Customer-focused strategies a top priority for the third consecutive survey
In terms of intended investment of time and/or money across various business elements, the areas most likely to see an increase over the next 12 months were:
- Customer retention strategies – 35%
- Customer acquisition strategies – 30%
- The number or variety of products or services offered by the business – 24%
- Prices and margins on the products or services sold – 23%
- Amount paid to employees – 20%
The top three priorities have been relatively consistent since the question was first asked in October 2011. Further down the list, the August 2013 Business Monitor Report found sales of products/services online drop out of the top five to seventh, while the amount paid to employees rose one spot to fifth.
MYOB CEO Tim Reed adds, “In an increasingly digital economy, it is disconcerting to see sales of products and services online decreasing in priority. However, this may be because business operators feel their current investment is just right – 61% were keeping their investment steady over the next year and only 6% were dropping investment back.
“Whatever the case, it pays to remember our research shows time and time again that SMEs with a business website are much more likely to increase their annual revenue than those who are not online. We have recently seen a financial chasm widen between the online-savvy and online-cautious businesses.
“Optimising the potential of an online sales environment can address many of the pressures and priorities identified by SMEs. It not only helps combat rising fuel prices for some, it enables all to take advantage of the time and resource efficiencies of being searchable, showcasing their wares and being paid via the web. More than half of consumers are researching online prior to making a purchase so establishing an online presence can help create new revenue streams, attract new customers, keep customers loyal and make your business more competitive.”
For MYOB product information, research results, business tips, discussions, client service and more visit the MYOB Australia website, or its The Pulse Blog, LinkedIn, Twitter, Facebook and YouTube.
*‘Other industry’ includes these sectors to minimise their margin of research error: Communication Services; Cultural & Recreational Services; Education; Electricity, Gas & Water Supply Services; Health & Community Services; Mining; and Personal & Other Services
For further comment or other information please contact:
MYOB Public Relations & Corporate Affairs Manager
P: 02 9089 9068 / M: 0407 450 860 /
Haystac Public Affairs Account Director
P: 02 8094 7779 / M: 0409 919 508 /
About the MYOB Business Monitor
Established in 2004, the MYOB Business Monitor is a national survey of small and medium business owners and managers, commissioned to independent market research firm Colmar Brunton. The most recent study ran in July and August 2013, surveying 1,022 operators from sole traders to mid-sized companies, representing the major industry sectors. The Monitor researches business performance and attitudes around areas such as profitability, cash flow, pipeline work, technology usage and government. Note: the weighting of MYOB client and non-client respondents is reflective of overall market proportions.
About MYOB Australia
Established in 1991, MYOB is Australia's largest business management solutions provider. It makes life easier for approx. 1.2 million businesses across Australia and New Zealand, by simplifying accounting, payroll, tax, practice management, CRM, websites, job costing, inventory and more. MYOB provides ongoing support via many client service channels including a network of over 40,000 accountants, bookkeepers and other consultants. It is committed to ongoing innovation, particularly in cloud computing solutions, and now spends more than AU$30 million annually on research and development. In 2013, MYOB expanded its offerings with the acquisition of accounting solutions provider BankLink. For more information, visit myob.com.au.