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Australia’s small and medium-sized enterprises have become more resilient as a direct result of the challenges they have faced during the pandemic, a new report finds.
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SMEs emerge more resilient post-pandemic
09 March 2022
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11 minute read
Australian SMEs have seen a shift in behaviour when planning for future growth and are now 12 per cent more resilient and better equipped for future disruption, according to an MYOB survey.
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The Success Report, which quizzed 500 SME owners and operators, finds 78 per cent have the same or more appetite for risk and 52 per cent have higher business confidence than before the pandemic.
Ali Henry, founder of Nowra-based boutique store Wild Tribe, said her business is way more resilient today than in 2020.
“I’m more resilient and I think it’s only natural that then flows into a small business. There’s a lot more emotion in a small business, it’s very personal,” she said.
“We’re a more resilient business now, and a better business now.”
The increased resilience is providing the SMEs with greater cash reserves, improving profitability and enhancing cash flow. It has made the sector better able to handle ongoing disruptions and economic uncertainty.
MYOB chief executive Greg Ellis said the data provided 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.
Cash flow and profitability
The balance sheet data in the current ratio index indicates SME cash-flow 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 per cent in December 2021.
Profitability metrics did not see such significant change, though they still improved, according to the report. In May 2020 gross profit margin was 7.5 per cent higher than in January 2020 but dropped a few points and ended 3.6 per cent up in December 2021.
Mr Ellis said it was encouraging to see stability within SMEs, even after government funding was reduced, and improved resilience against further challenges.
“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,” he said.
“The survey results show strong levels of confidence, which is an encouraging sign for long term recovery.”
For businesses like baby bags brand OiOi, it has spurred the need to find other avenues of improving profitability and enhancing cash flow.
“While shipping prices have increased, that is, the cost of containers, we’ve chosen not to increase our recommended retail price,” Isabella Bennetts-Roberts, founder of OiOi, said.
“We’ve had to find other ways to protect our profit margin.”
In Nowra, Ms Henry said that while omicron had affected foot traffic and sales were down significantly, this only bolstered the importance of having higher cash reserves, and to be “really smart about what we spend our cash on.”
“At the moment we’re not buying new stock. We’re making do with what we’ve got, to get through this cycle. We’re a more resilient business now, and a better business now,” she said.
Invoice payment times
Around the onset of the pandemic, SMEs invoices were paid faster with the on-time invoices index up 8.8 per cent in November 2020 compared to January of that year, a trend that the data suggests is continuing, according to findings of the survey.
“E-invoicing has certainly helped,” Ms Roberts said. “It’s a great tool and has streamlined the whole payment process from end-to-end."
Surveyed SME owners and operators also highlighted that the top reasons to adopt faster payments include being able to ensure more timely payment, with customers also becoming more conscientious.
Mr Ellis said it was unsurprising that business owners would be more conscious of invoice payments when they were in pandemic survival mode.
“Seeing customers more conscientious and supportive of SME invoice payment times is a welcome outcome and one that will greatly assist with cash flow into the future,” he 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.”
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