Will interest rates and inflation impact cash flow and investments for SMEs before FY24?

About the Study

What proportion of Australian SMEs will see impacts to their cash flow due to the current economic climate?

What proportion of Australian SMEs will see impacts to their cash flow due to the current economic climate? By State.

Across the States, a higher proportion of NSW SMEs revealed potential cash flow problems, at 82 per cent followed by 81 per cent of Western Australian SMEs, 77 per cent of Victorian, 73 per cent South Australian SMEs and 67 per cent of those in Queensland who said the same.

Queensland businesses appeared to be the most prepared for the changing economic climate, with a third (33 per cent) stating their cashflow would not be impacted by growing interest rates and inflation. This was followed by 27 per cent of South Australian SMEs, 23 per cent in Victoria, and compared with 19 per cent and 18 per cent in Western Australia and NSW, respectively.

Will the current climate of fast-growing interest rates and inflation impact your cash flow in 2022 and 2023? By business size.

Small Business Loans Australia analysed responses across micro (1-10 employees), small (11-50 employees), and medium-sized businesses (51-200 employees). It found micro businesses are less likely to have their cash flow impacted by tough economic conditions: with just 29 per cent forecasting no problematic cash flow issues this financial year. This compares with 15 per cent of small businesses and 14 per cent of medium-sized businesses who predict they will not have cash flow issues.

While smaller businesses generally tend to turn over lower profits and have less of a financial cushion than big corporations, fewer employees and less overhead costs may enable them to maintain cash flow more successfully than their larger counterparts.

How much cash flow do Australian SMEs need to meet their expenses each month?

Respondents were asked to specify how much cash flow they need every month to meet all their business expenses. Thirty-nine (39) per cent require $50,000 or more, while one in five (21 per cent) require at least $100,000.

How much cash flow do Australian SMEs need to meet their expenses each month? By State.

A larger proportion of South Australian SMEs were more likely to require less cash flow to meet their monthly expenses: 30 per cent indicated they required at least $50,000 each month. This was followed by 31 per cent of Queensland SMEs, 38 per cent of Victorian SMEs, and compared with 47 per cent in NSW and 56 per cent in Western Australia.

How much cash flow do Australian SMEs need to meet their expenses each month? By business size.

A significant proportion of micro businesses require more cash flow to meet monthly expenses: 18 per cent of micro businesses indicated they needed $50,000 or more each month. This compares with 78 per cent of small businesses and 91 per cent of medium-sized businesses.

What proportion of SMEs have a strategy in place to maintain cash flow during challenging periods?

What proportion of SMEs have a strategy in place to maintain cash flow during challenging periods? By business size.

A similar proportion of SMEs across all sizes revealed they have a strategy or plan to maintain cash flow during tough periods. Sixty (60) per cent of micro- to-small businesses said they have a strategy, followed by 57 per cent of medium-sized businesses.

With the rising interest rates and inflation, will you delay or cancel any planned investment in your business?

Across the States, a larger proportion of NSW SMEs will delay planned investments into their business, at 47 per cent. This is followed by 43 per cent of South Australian SMEs and compared with 39 per cent of those in Victoria, 33 per cent in Queensland and 31 per cent in Western Australia.

More SMEs in NSW than those in any other State revealed they plan to cancel or delay investments, at 61 per cent. This compares with 56 per cent of SA SMEs who said the same, 55 per cent of Victorian SMEs, 50 per cent of those in Queensland SMEs, and just 37 per cent in Western Australia.

What proportion of SMEs will delay or cancel planned business investments due to the current climate? By business size.

Did SMEs have significant business investments planned for the next year?

Respondents were asked to specify how much they planned to invest in their business before FY24 regardless of whether they will cancel or continue with those investments.

More than half (55 per cent) indicated they planned to invest more than $50,000 in their business before next July, while one in five (19 per cent) planned to invest $100,000 or more.

West Australian SMEs are more likely to invest a significant sum in their business, with 36 per cent indicating they planned to invest more than $100,000 in the next year. This compared with just 13 per cent of Victorian SMEs, 10 per cent in South Australia, 6 per cent in NSW, and 5 per cent in Queensland.

Smaller SMEs planned to invest less in their business in the next year: 37 per cent of micro businesses indicated they planned to invest just up to $10,000, compared with 12 per cent of small businesses and just 6 per cent of medium- sized businesses.

As such, a higher proportion of larger businesses intended to invest larger sums in the next year. Four in five (81 per cent) medium-sized businesses revealed they planned to invest at least $50,000, compared with 72 per cent of small businesses and 42 per cent of micro businesses.