Rising wage inflation is the top concern for small business with over 70% of SMEs worried about increased wage costs impacting their business this year.
According to the latest round of the SME Growth Index by Australia’s leading non-bank business lender, ScotPac, 75% of larger SMEs (revenue between $5 – $20 million) are worried about rising wage costs, with 68% of smaller SMEs (revenue between $1m and $5 million) citing an increase to employee expenses as their number one concern for reaching revenue targets this year.
Rising interest rates are also posing a big threat to SMEs with 45% of SMEs concerned about the impact of higher borrowing costs on their business.
However, despite 53.6% of SMEs falling short of revenue targets set 12 months earlier (April 2021) – with an average shortfall of 18.8% – almost two-thirds were confident they will achieve their 2022 business revenue targets.
ScotPac CEO Jon Sutton said: “SMEs are reporting a higher level of confidence in the economic outlook with a majority saying they are confident in the outlook for their business.
‘However, they are well aware of further challenges on the horizon, with rising wage costs and interest rates the major concerns and they will be looking to the incoming Federal Government for support.’
According to the Index, other key concerns that SMEs expected to negatively impact their operations in 2022 included:
- Rising fuel prices (30%)
- higher energy costs (27%)
- Regulatory and compliance costs (27%) and
- Logistics fees (25%)
- Insurance fees (17%)
- Rising commodity prices (13%)
“With the inflation rate of 5.1% at a 20-year high, it’s clear that rising cost impacts represent a genuine threat to SMEs achieving their targets this year,” said Mr Sutton.
“That will inevitably put additional pressure on business cashflow as SMEs grapple with rising cost impacts and delays in passing these costs through to their customers.
“SMEs should carefully consider various solutions to finance their cashflow requirements in this environment, including invoice finance and business loans.
Mr Sutton said the SME sector, which employs millions of people across the country, would look to the incoming Federal Government to assist them in addressing these headline challenges .
‘More than 700 small and medium business leaders participated in the SME Growth Index and they were clear in the type of support they want from the Federal Government.
‘It includes further extension of the accelerated deprecation scheme (24% of SMEs), deeper company tax cut relief (18%) and simplified Business Activity Statement (BAS) and regulatory requirements (18%),” Mr Sutton said
ScotPac’s bi-annual SME Growth Index, is Australia’s longest running research report on small business sentiment towards growth prospects.
The full report, which is scheduled for release in September incorporates feedback from 700 plus industry participants on topics encompassing revenue forecasts and profit expectations, cashflow management practices, and growth financing intentions. It is a comprehensive temperature check of a sector responsible for employing millions of Australians.
ScotPac is Australia and New Zealand’s largest non-bank SME business lender, providing funding to small, medium and large businesses from start-ups to enterprises exceeding $1 billion revenues. For more than 30 years ScotPac has helped thousands of business owners succeed, offering fast and flexible funding. From simple to complex, small to large, start up, growth or turnaround – ScotPac can help with a range of funding from Invoice, Trade or Asset Finance to Home Loans and Business Loans.
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