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

Australian businesses are becoming more confident as the economy improves, but low sales and consumer demand are having an impact on the ability to keep staff, the latest Sensis Business Index reveals.

The survey, which interviewed about 1,800 small businesses, also found businesses are continuing to have difficulty accessing credit from the major banks.

The index reveals employment fell by 7% during the March quarter, the lowest point in the 17-year history of the survey, indicating businesses are still struggling to keep up in the aftermath of the financial crisis.

While confidence improved by 49%, 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 Singh says will make any recovery difficult to manage. Additionally, she says the reasons given for staffing difficulties vary between states.

“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 greatest problems experienced by small businesses are lack of sales, cashflow, the economic climate, and finding and keeping staff. However, Singh also says SMEs are continually struggling to gain finance.

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 which 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.