Prepared for anything: tough Aussie SMEs more resilient post pandemic panic
09 Mar 2022
Australia’s small and medium sized enterprises (SMEs) are 12% more resilient as a direct result of the challenges they have faced in the pandemic, according to MYOB’s new SME Success Report.
The SME Success Report, which comprises four years of anonymised data insights from MYOB, captures key resilience indicators in the form of a Resilience Index. The Resilience Index is made of sub-indices tracking balance sheet strength, gross income margin and invoice payment times to provide an overarching resilience score.
The data shows that pivoting behaviours adopted during the pandemic have prepared SMEs in planning for their future growth.
Additionally, MYOB surveyed 500 SME owners and operators, finding 78% have the same or more appetite for risk and more than half (52%) have higher business confidence than before the pandemic.
MYOB CEO Greg Ellis says the data provides rich insight into the strength of Australian SMEs, and their ability to withstand future disruption.
“Now we’re moving closer to COVID-normal, we can look back on how SMEs have fared throughout this challenging period, and how equipped they are to operate in this environment,” Mr Ellis said.
Cashflow and profitability
The balance sheet data in the Current Ratio Index indicates SME cashflow levels stayed high during the first year of the pandemic, after being initially bolstered by the economic stimulus measures introduced by the Government in April 2020. In November 2020 the index was 23.4 percentage points higher than the January 2020 baseline and mostly remained that way, up to 25.8% in December 2021.
Profitability metrics did not see such significant change, though they still improved. In May 2020 gross profit margin was 7.5% higher than in January 2020 but dropped a few points and ended 3.6% up in December 2021.
“It’s encouraging to see stability within SMEs, even after Government funding was reduced, improving their resilience against further challenges,” Mr Ellis said.
“Holding onto higher cash reserves for emergencies bolsters resilience, though investing in growth opportunities and keeping the economy flowing is what will keep the SME sector thriving long term. The survey results show strong levels of confidence, which is an encouraging sign for long term recovery.”
Invoice payment times
Around the onset of the pandemic SMEs invoices were paid faster with the On Time Invoices index 8.8% up in November 2020 compared to January of that year, a trend that the data suggests is continuing. Surveyed SME owners and operators said the top reasons for faster payments include applying more effort to ensure timely payment (40%), customers are more conscientious (39%) and changing how their invoices are issued (38%).
“It’s unsurprising that business owners would be more conscious of invoice payments when they’re in survival mode during the pandemic. Seeing customers more conscientious and supportive of SME invoice payment times is a welcome outcome and one that will greatly assist with cashflow into the future,” Mr Ellis said.
“If the last two years have taught us anything it’s to expect the unexpected. For the country’s SMEs, moving to COVID-normal has meant continuing adaptation of business operations. While it’s by no means been an easy road, the resilience of the sector is strong and will hold them in good stead for the next chapter.”
For further comment or other information please contact:
Selina Ife, Communications Consultant, MYOB
The MYOB SME Resilience Index is a composite index calculated as an equal weighted average of the three MYOB SME Resilience Sub-indices: the MYOB SME Current Ratio Index; the MYOB SME Gross Income Margin Index; and the MYOB SME On Time Invoices Index.
The MYOB Current Ratio Index is defined as SME current assets divided by current liabilities and provides a measure of an organisation’s ability to meet its shorter-term obligations.
The MYOB SME Gross Income Margin Index is defined as the difference in gross income (including sales and government subsidies) and cost of goods sold, divided by gross income and provides a measure of an organisation’s profit margin.
The MYOB SME On Time Invoices Index is defined as the percentage of invoices paid on or before the invoice due date and provides a measure of the strength of an organisation’s cash flow.
The MYOB Snapshot survey was conducted using Quality Online Research’s business panel. 580 decision makers were surveyed online between January 27th – February 3rd, 2022.
MYOB is a leading business platform with a core purpose of helping more businesses in Australia and New Zealand start, survive and succeed. MYOB delivers end-to-end business, financial and accounting solutions direct to businesses employing between 0 and 1000 employees, alongside a network of accountants, bookkeepers and consultants. For more information visit myob.com or follow MYOB on LinkedIn.