Business index shows SMEs are confident but still plagued by low sales

According to the latest Sensis Business Index, Australian businesses are becoming more confident as the economy improves, but low sales and consumer demand are having an impact on their ability to keep staff. The survey also found that businesses were still having difficulty accessing business finance from the major banks.

The survey interviewed about 1,800 small businesses in Australia and found that business confidence improved by 49%, but the sales index fell by 2% along with profitability and capital expenditure, which fell by 4% and 1% respectively.

Report author Christena Singh says businesses are more confident about the economy but are still feeling significant pressures from low sales and demand.

"Confidence is up from this time last year, but it has peaked and slid down in the quarter, which is not a good sign. What this shows is that businesses are concerned about not seeing consumer demand."

"Then again there are also businesses which are experiencing growth and good times, but these businesses are finding trouble with hiring staff to fuel that growth. It's a difficult position to be in for a lot of businesses."

The report found about 10% of businesses are experiencing difficulty finding staff, which will make any recovery difficult to manage. Additionally, Singh states that the reasons given by businesses for staffing difficulties vary from state to state.

"If you look at the employment situation, it's actually quite complex. When we ask businesses about staffing, it's a mixed package. If they are on the east coast, the staffing issues are due to the economy, but in the NT it's mostly due to personal reasons. But the message is that businesses are looking for staff."

The survey also found that sales have decreased by 2%, wages and salaries have increased by 5%, prices have jumped by a solid 13%, but capital expenditure has fallen by 1% following a 9% drop in the previous quarter.

Overall, the report found that the greatest problems experienced by small businesses in Australia are a lack of sales, cashflow, the economic climate, and finding and keeping staff. However, Singh also says SMEs are continually struggling to gain finance from their bank.

The report found 35% of small businesses feel it is relatively difficult to access finance, with 20% believing it is relatively easy. Nearly 66% of the companies who had attempted to access finance were successful, but Singh says the market is still relatively tight.

"Some sectors are doing quite well with finance, such as health and community services, but at the other end of the scale we're seeing retail businesses finding difficulties with finance."

"Even though interest rates are quite low the message here is that businesses perceive the finance situation to be very difficult, and in fact it is still difficult for businesses to gain finance."

Meanwhile, businesses said the Government hasn't done enough to help SMEs, with just 18% believing current policies help support small business. About 51% said these policies make no difference, with 31% actually believing the policies work against small business.

If you are having difficulty getting business finance from your bank, speak to the mortgage brokers at Intellichoice on 1300 55 10 45. We have access to alternative business finance solutions that don't tie you with the bank's strict lending criteria, including invoice finance, trade finance, inventory finance and equipment rental hire.