SMEs generating a profit but trimming expenses to do so

The data comes from the latest ACA Research SME Sentiment Tracker that found many SMEs are still operating with lower revenues (33 per cent) than before the pandemic, but the proportion generating a profit (54 per cent) continued the upward trend that commenced in February. 

Short-term expectations are also very strong with 31 per cent expecting better revenues over the next four weeks and only 6 per cent expecting a decline.

However, despite the key financial indicators remaining relatively strong, confidence about economic conditions has again weakened over the past month.

More than 50 per cent of small businesses expect Australian conditions to weaken over the next three months and 58 per cent expect global economies to decline.

And now only 35 per cent of businesses expect to have any growth, compared to 43 per cent last month.

The rising cost of fuel is of most concern with 54 per cent of SMEs now more worried about how that will impact their business with the reintroduction of the fuel excise.

As confidence weakens and cost pressures continue, SMEs are beginning to reduce investment including nearly 20 per cent of businesses pulling back spending on capital equipment and marketing over the next three months.

The number of SME job vacancies also fell this month from a high of 35 per cent in July to 30 per cent in September.

Despite fewer job vacancies, the difficulty in recruiting continued to escalate with 57 per cent of SMEs finding it very difficult to find staff for these positions. Lack of skilled candidates (69 per cent) and high wage demands (44 per cent) have spiked in September.

In summary, SME revenue and profit indicators remained robust, but confidence about local and global economic conditions and ongoing cost pressures continued to propagate caution. Accordingly, business investment is likely to be softer moving towards the Christmas period.