6 business challenges to look out for

There are six challenges set to impact the way Aussie businesses operate going forward, according to a chief executive and founder.

Alon Rajic, founder and CEO of Small Business Loans Australia, said the challenges stem from tougher economic conditions and growing concerns of a possible recession.

The good news is, however, that many business leaders are showing signs of resilience and a willingness to adapt, Mr Rajic said.

“A tighter and costlier employee market, rising rates, tougher borrowing criteria, inflation and continued supply chain challenges paint a gloomy picture for the business sector. Business owners must vigilantly stay informed about available resources, changes in government policies, and other opportunities that can help mitigate these challenges and secure the long-term success of their ventures,” he said.

“To weather the storms on the horizon, SMEs must keep [an] eye on early warning signs of economic changes and seek innovative ways to tackle challenges while uncovering untapped opportunities that could be their path to success in the years to come.”

As shared by Mr Rajic, the top six challenges worth keeping an eye on are:

1. Sixty-eight per cent of SMEs can’t fill job vacancies

“Job vacancies in Australia remain at unprecedented levels since the GFC, with research showing 68 per cent of businesses are still struggling to find suitable staff,” he said.

“Micro businesses are hardest hit, with almost 80 per cent are unable to fill job vacancies. The impact varies across industries, with 90 per cent of job vacancies being in the private sector. While health and tech industries show some improvement, hospitality, manufacturing, and agriculture sectors continue to face significant challenges, with up to 100 per cent unable to fulfil vacant staff roles.”

2. Late payments and tighter lending impacting business cash flow

“Amid worsening economic conditions, numerous SMEs will find themselves dependent on business lending as their cash flow diminishes,” Mr Rajic said.

“Among the challenges anticipated in recent research, 30 per cent of SMEs expect difficulties in collecting customer payments and 26 per cent in attracting sales. While [it] may sound like good news that the loan values made to SMEs have increased in recent years, data shows an alarming number have no financial lifeline at all, and 50 per cent face daunting obstacles when attempting to access bank loans.”

3. Small and large businesses are paying more for labour

“This financial year, employers are paying more for labour, whichever solution they look to – potentially impacting growth plans for some small businesses,” Mr Rajic said.

“Since July, companies have been paying a higher, 11 per cent rate, for superannuation and a higher minimum wage of $23.23 per hour. Those looking to sponsor migrants will also pay more, with the base salary of sponsored employees lifting to at least $70,000 a year – up from $53,900.”

4. One in two SMEs are ploughing through recession fears and focusing on growth

“From bushfires, floods, lockdowns, inflation, labour shortage and interest rate increases, Australian businesses have faced unprecedented challenges in recent years,” Mr Rajic said.

“Despite these obstacles, Small Business Loans Australia research revealed that half (48 per cent) of SMEs are expanding this year, even while they believe there is a risk of recession. This is more than twice the proportion of respondents (22 per cent) who focused on growth in 2022.”

5. Rising interest rates and bank fees

“Rising interest rates and bank fees may motivate businesses and individuals to switch over to alternative fintech solutions,” Mr Rajic said.

“A survey commissioned by Money Transfer Comparison revealed that eight in 10 Australians believe their banks’ fees are unreasonably high, and two in three are willing to switch to innovative fintech services with competitive fees.

“Not only can SMEs take advantage of potentially lower fees, but also digital innovations such as international transfer, digital credit cards, buy now, pay later (BNPL) options, expense tracking, rewards programs and cashback services.”

6. Limited asset ‘write-off’ rules

“New rules for asset write-offs are only benefiting small businesses this financial year,” he said.

“From 6 October 2020 to 30 June 2023, businesses earning up to $5 billion could immediately write off all eligible capital assets without a financial limit. The tax rules [n]ow specify that businesses turning over less than $10 million can write off up to $20,000 per asset. Small businesses with an annual turnover below $10 million can immediately deduct eligible assets under $20,000, used or installed before 1 July 2024.”