Australia’s small businesses are feeling the squeeze as the end of financial year looms, with many reporting cash flow stress and personal strain, according to the latest SME Sentiment Report commissioned from Prospa, in partnership with YouGov.
The economic climate also has a personal impact, with more than three in four (77%) say rising costs and a challenging economic environment has impacted them personally, most commonly forcing them to reduce their own income and experiencing increased stress/ burnout (43% respectively).
Cash reserves are tight, and funding demand is rising
The report shows that 13% of Small to medium enterprises (SMEs) have no cash reserves at all, and many are looking for external funding to bridge the gap. Nearly one in three (30%) expect to access external funding in the next 12 months, with an average funding need of $24,701.
Additionally, two-thirds (66%) of SMEs report experiencing cash flow stress in the past year, and 39% of that group shared that it even impacted their sleep. Despite this pressure, most small business owners remain optimistic about their operations, with 74% rating their business health as ‘good’. However, one in four (25%) rate it as poor in the current environment.
However, rising costs continue to be a major concern. Most SMEs (83%) are taking action by cutting non-essential expenses (46%) and raising prices (37%).
“Small businesses are showing incredible resilience and adaptability,” said Beau Bertoli, Co-Founder and Chief Revenue Officer at Prospa. “It’s been a tough time for many, marked by sleepless nights and dipping into personal savings – but I’m continually impressed by how business owners are embracing technology and finding smarter ways to operate.”
The technology gap for SMEs is widening even with the integration of AI
Digital tools are playing an increasingly significant role in assisting SMEs with their challenges. Six in ten (60%) say AI is critical to their business, with the top uses including reducing admin time (33%), and planning for growth (23%). Professional services firms are leading the way, with 82% citing AI as a key enabler of their operations.
However, among owners planning to invest in their businesses to combat rising costs (83% of those surveyed), only 21% intend to invest in technology.
“Technology is no longer a luxury – it’s a necessity,” Bertoli added. “AI is helping small businesses do more with less, freeing up time and resources to focus on growth. But adoption, particularly if you are competing with larger or global businesses, needs to be higher.”
Regional businesses believe there are misconceptions about their credibility
The report highlights the experience of operating a business regionally. Regional small businesses feel overlooked, with 56% believing they’d perform better in metro areas and 71% saying they believe that city-based clients or stakeholders have misconceptions about regional businesses, particularly that they are less professional or credible. Yet, 52% of metro SMEs would consider moving regionally if it meant higher revenue, revealing a surprising openness to regional growth.
“Regional businesses are just as ambitious and talented as their metro counterparts,” said Bertoli. “It’s time we challenge outdated perceptions and unlock the full potential of Australia’s regional economy.”