To improve Australian SME performance in 2017, businesses must keep their fingers on the pulse of the latest economic trends. This means looking at past and present research to try and predict the future.
As the end of the financial year (EOFY) approaches, many of you will be asking 'how will Australian SMEs perform in 2017-18?' Well, let's take a look at the key data and see whether businesses can pick up some SME tips for this FY.
NAB's March quarter 2017 survey showed optimism and business conditions are still going strong.
Battle of the Budgets
Last year, Australian SMEs were broadly positive about key measures introduced in the Federal Budget. Specifically, MYOB revealed that 56 per cent of small businesses believed lowering the company tax rate to 27.5 per cent for organisations earning revenues of up to $10 million was a positive move.
Nearly three-quarters of respondents also thought expanding the popular instant write-off for assets worth up to $20,000 would encourage growth. However, MYOB's pre-Budget survey for 2017-18 showed SMEs were more apprehensive this year.
Forty-three per cent weren't confident the Budget would deliver, particularly as the $20,000 write-off threshold was due to return to $1,000. Nevertheless, Treasurer Scott Morrison confirmed the scheme would be extended for a further 12 months.
What this means for SME performance in 2017-18: Business owners now have one more year at least to make large-scale asset investments to boost growth in their business, such as innovative IT systems, new equipment and the latest machinery. This can be funded via debtor finance or other options if businesses don't have the upfront capital to hand.
SME sentiment and environment stay strong
Business conditions and confidence were on the rise in the three months leading to June 2016, according to NAB's quarterly SME survey. In fact, business conditions were at their strongest level in six years at the time of the poll.
Fast forward one year and NAB's March quarter 2017 survey showed optimism and business conditions are still going strong.
"It's particularly encouraging to see the smallest firms catch up, with the largest improvement in conditions since end-2015 seen by low-tier SMEs with turnover of $2-3 million," said Alan Oster, group chief economist at NAB.
What this means for SME performance in 2017-18: This data spells good news for SMEs as they look ahead to the next 12 months, with sentiment and conditions showing long-term stability across multiple sectors, including health, property, finance, business and transport. However, businesses in hospitality, retail and manufacturing have struggled and may continue to do so this FY.
Expectations set for slump
Despite positive confidence and commercial conditions among SMEs, the latest Dun & Bradstreet Business Expectations Survey suggested a more subdued outlook elsewhere.
The survey, which covers organisations of all sizes, showed a six-year low in actual profit forecasts for the third quarter of 2017. Moreover, business performance slumped to its lowest levels in four years.
What this means for SME performance in 2017-18: The evidence suggests that small enterprises are enjoying better conditions and are more optimistic than the wider business community. Nevertheless, any negative forecast for enterprises should be taken seriously, and SMEs may want to prepare for a slump in performance by examining their cashflow and considering finance options.
If you'd like to discuss debtor finance and other services for improving your SME performance in 2017-18, please contact our team today.