Australia’s small to medium-sized companies (SMEs) proceed to battle underneath lingering inflation and cashflow pressures, resulting in round half of them delaying investments in plant, gear and folks.
Banjo Loans SME Compass exhibits SME’s proceed to face important cashflow challenges, with near half (45%) reporting they’ve delayed strategic investments and postpone enterprise alternatives up to now yr on account of ongoing uncertainty and a widespread insecurity.
The report highlights that money circulate points have disproportionately affected sure industries, with manufacturing (56%), monetary and insurance coverage companies (53%) and humanities and recreation companies (53%) experiencing probably the most delays in enterprise alternatives as a direct end result.
In keeping with Banjo Loans CEO Man Callaghan (pictured), this underscores the continued pressure that SMEs – the engine room of the Australian economic system – are going through as they navigate an unsure financial panorama.
“Money circulate stays a crucial subject for SMEs which highlights the significance of cautious monetary administration to make sure SMEs can proceed to deal with progress and run their companies with out losses on this unsure market.”
However maybe of even higher concern is the influence of the continued uncertainty and insecurity being felt within the sector. Simply two years in the past, 50% of the SME’s we surveyed considered inflation as a progress barrier. Nonetheless, up to now 12 months this determine has risen to 65%.”
In keeping with the SME Compass knowledge, the manufacturing, monetary companies and humanities sectors are feeling the stress greater than most. These industries, usually characterised by longer cost cycles and better upfront prices, have been compelled to make powerful choices about which alternatives to prioritise.
The SME Compass report additionally discovered that whereas two-thirds of SMEs have been capable of meet their money circulate forecast targets in 2024, one-in-three (33%) report they’re carefully monitoring money circulate and spending. Fee phrases have additionally confirmed essential, with greater than half (55%) of SMEs now providing shoppers 30-day phrases.
Regardless of the current choice to decrease rates of interest, and inspiring indicators of a slowing inflation, the most recent Banjo knowledge exhibits inflation continues to be the first problem for SMEs.
Man Callaghan says many SMEs that had beforehand handed on rising prices to prospects have shifted gears into 2025, now prioritising value reductions and operational enhancements to keep away from additional worth hikes.
“Inflation has been a serious hindrance to progress for SMEs, as it’s driving up overheads. The SME Compass exhibits that 65% of SMEs cite inflation as a main progress barrier, with 60% of SMEs saying overheads are the first purpose for value changes. In the meantime, 45% have raised costs to fight inflation, although that is down from 49% in 2022 and 47% in 2023,” Callaghan mentioned.
The report additional reveals that 65% of SME house owners consider inflation will proceed to hinder their progress in 2025, with this determine unchanged from final yr. Trying forward, 39% of SMEs plan to proceed slicing prices to fight inflation, 36% intend to lift their costs additional and 30% will change into extra selective with shoppers or gross sales.
Callaghan mentioned a “greenshoot” within the knowledge was that regardless of these present challenges, 68% of SMEs are on observe to attain their progress targets within the coming yr. Of people who met targets, 70% centered on important product enhancements, and 66% invested in new expertise to help enterprise progress. Nonetheless, inflation (39%), lowered shopper spending (33%), recruitment challenges (26%) and gathered tax debt (18%) have been cited as the important thing hurdles.
“There’s a sure resilience and willpower within the SME sector that’s the reason it’s such an vital a part of the economic system and a key barometer of our financial outlook,” Callaghan mentioned.
What we’re seeing are SMEs regularly flexing and adapting their strategy to managing inflation by specializing in each inside and exterior value reductions, with out burdening prospects, and on a regular basis nonetheless striving for progress,” added Callaghan.
Different Key Findings from Banjo Loans’ 2025 SME Compass Report:
Funding Plans for 2025: In 2025, 44% of SMEs are utilizing financing, with 61% counting on financial institution loans, 28% on investments from founders, and round one-in-four (24%) utilizing various lenders. Regardless of ongoing uncertainty concerning rates of interest, greater than half (52%) of SMEs stay cautiously optimistic for the yr forward.Recruitment Traits: Whereas recruitment has change into considerably simpler for SMEs over the previous 12 months, attracting and retaining the fitting expertise stays a major problem. Forty-five p.c (45%) of companies discovered it simpler to rent in 2024 in comparison with earlier years.
Trying ahead, in 2025, 63% of SMEs report they plan to prioritise worker well-being as a key a part of their workforce technique. Moreover, 46% of companies plan to increase their workforce within the subsequent 12 months. SMEs in training and coaching (49%), monetary and insurance coverage companies (47%), and manufacturing (44%) stay significantly involved about labor shortages.
Brokers and SME Financing: In keeping with SME Compass knowledge, 38% of SMEs used a dealer up to now yr, valuing their help in securing higher rates of interest and simplifying the financing course of. The most typical methods SMEs discover brokers are by way of suggestions from accountants (46%), household or mates (31%) or dealer comparability web sites (23%).Transport Postal and Warehousing: SMEs within the Transport Postal and Warehousing sector are particularly feeling the pinch, with 54% stating that inflation is a barrier to progress, in comparison with the 39% common. Moreover, solely 69% of companies on this sector report that shoppers pay invoices on time, in comparison with an 85% common throughout all industries. These companies are additionally probably to expertise challenges when acquiring finance (31%) and usually tend to base their financing choices on rates of interest (54%).
Go right here to learn the report in full.
