June 17th 2024.
According to a recent survey conducted by YouGov on behalf of Prospa, it has been found that more than one in five small businesses are facing a major financial crisis. In fact, 22% of small to medium enterprises have completely depleted their cash reserves, while another 18% have less than a month's worth of expenses left. The situation is dire for these businesses, as an additional 21% believe they will run out of funds within the next two months.
Beau Bertoli, co-founder and chief revenue officer of Prospa, expressed concern over the current economic climate and its impact on small businesses. He noted that the recommended three to six months' worth of cash reserves for businesses to cover their operating expenses seems to be getting further out of reach. This is a troubling trend, as it leaves businesses vulnerable and struggling to survive.
The survey, which polled over 500 business leaders, revealed that the hospitality industry is among the hardest hit. This comes as no surprise, given the recent high-profile closures and bankruptcies of restaurants. Bertoli also noted that retail and hospitality businesses have been disproportionately affected by a decrease in discretionary spending, rising supply chain costs, and increasing fuel and energy expenses.
The financial strain on these businesses is not just limited to their reserves, but also extends to the personal funds of their owners. In fact, 31% of surveyed business owners reported using their personal funds to cover small business expenses. This, coupled with the added stress and burnout of managing a struggling business, paints a grim picture for the future of these enterprises.
As the Reserve Bank's June interest rates meeting approaches, the market predicts that rates will remain at their current 12-year high of 4.35%. However, there has been speculation that the recent higher-than-expected inflation data may lead to a rate hike, which could further impact borrowers and businesses.
Adding to the already complicated situation is the significant amount of tax debt owed by small businesses. In April, the Australian Taxation Office reported a staggering $33 billion in unpaid GST and PAYG withholding. ATO Commissioner Rob Heferen expressed concern over the increasing number of businesses falling behind on these payments, which ultimately makes it difficult for them to stay afloat.
In conclusion, the survey's findings paint a concerning picture for small businesses in Australia. With depleting cash reserves, personal funds being used to cover expenses, and the looming threat of tax debt, these businesses are facing a tough road ahead. As the Reserve Bank makes its decision tomorrow, all eyes will be on the potential impact on these struggling enterprises.
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