2013 'determinedly optimistic'


The forecast for Australian SMEs looks brighter with optimism the byword for the year ahead

2013 'determinedly optimistic'
2013 ‘determinedly optimistic’

December 21, 2012

While global economic uncertainty continues, the business outlook is brighter for Australia’s small to medium enterprises (SMEs) in 2013, according to recent MYOB-commissioned research.

MYOB CEO Tim Reed says the sector has reached a turning point, and despite businesses going through another tough financial year, there appears a sense of determination and optimism prevalent throughout the SME sector.

Based on Colmar Brunton surveys, MYOB has analysed business trends from October 2010 to make its predictions for the year ahead.

Reed says while memories of the GFC fade, MYOB business monitor surveys show Australian SMEs remain uncertain about the economy.

"Conditions remained tough last financial year," he says.

"Twice as many operators saw their revenue fall than rise, and the majority, around two-thirds, estimated economic improvement was more than 12 months away.

Reed says despite a succession of RBA cash rate cuts since May, consumers didn’t spend any more during this period, and the Australian dollar remained high, with indications it will remain so for some time.

"This makes local exports and tourism less affordable for overseas buyers and overseas travel and shopping more appealing for Australians – so many operators are hoping to see the dollar drop, especially with the latest cash rate cut."

But, Reed says there is nevertheless a sense of determination and optimism prevalent throughout the SME sector.

"We’re starting to see signs of the tide turning on overall business outlook, particularly for those who have embraced innovations such as cloud computing and other activities that save time and increase productivity," he says.



INTERNET AND CLOUD COMPUTING

Despite Australia’s internet audience reaching 15.7 million in September 2012, a surprising 60 percent of SMEs are without a website.

The business community’s use of social media has declined after rising temporarily from 18 percent to 24 percent between October 2010 and October 2011, but since declined to just 16 percent by July 2012.

In the most recent survey, operators were asked about the use of cloud computing in their business with 14 percent saying they had taken it up, whereas 79 percent say they weren’t using it and 8 percent didn’t know.

Reed says he hopes to see a faster rate of adoption of business websites, suggesting that operators are handing customers to competitors by not being online.

"I hope the decline in social media usage doesn’t continue," he says.

"Australian SMEs need to become better connected and more visible online."

Reed says the continued roll out of the national broadband network (NBN) should increase the appeal of cloud-enabled and cloud-based products and services.

"The benefit of cloud-based technologies is that you don’t need to spend much money upfront," he says.

"Our research found SMEs using cloud computing were 53 percent more likely to experience a rise in revenue, as were those with a website, yet these operators are not yet in the majority.

"The vast gains that can be achieved by bringing business online will almost certainly outweigh any time spent researching and implementing the best way forward."



FUEL PRESSURE POINT

And moving into 2013 fuel prices will again be the top pressure point for SMEs, according to MYOB’s business monitor report.

Interest rates provided the top pressure point back in October 2010, followed by cash flow, price margins and profitability, then fuel.

By March 2011 fuel prices had shot to first and have continued to rank first, with cash flow second, then price margin and profitability and interest rates.

"With fuel prices continuing to reach record highs and expected to remain so over the short term at least, this is likely to again rank as the number one pressure point in 2013," Reed says.

"The pressure is felt by many SMEs, but most of all by those in transport, postal and warehousing.

"Our latest round of research found 49 percent of respondents in this sector experienced a drop in revenue last financial year," Reed says.

Despite the ‘gloom’ surrounding fuel and other pressure points, Reed says SMEs saw the year ahead as ‘steady’, with 29 percent expecting revenue to rise, 22 expecting to see a fall, but the larger portion of the wider business community – 43 percent – expecting revenue to be stable, and about six percent undecided.

"Our research indicates the small and medium business sector has reached a turning point, with economic confidence and revenue expectations steady over the second half of the previous financial year," Reed says.

"With almost three in every four expecting either stable or rising revenue this financial year we could see a concurrent rise in economic confidence into 2013."

Reed says new legislation introduced in July 2012 should help boost business performance.

"The tax-free threshold increase for individuals to $18,200 may see more part time workers join and stay in the workforce, allowing operators to draw from a larger group of skilled candidates when employing new staff," he says.

"Another positive contributor is the small business instant tax write-off increase to $6500, which I encourage taking advantage of to invest in equipment that improves productivity and cash flow."

Reed says 45 percent of SMEs view the tax loss carry-back scheme as a business health contributor.

As for which states are most confident, the top spot goes to Western Australia.

"Based on past performance, Western Australians will likely be the top business revenue performers," says Reed.

"However, there is increasing talk of the slowing pace of the mining sector and that may turn this trend on its head."



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