Australian small to medium enterprises are grappling with significant financial challenges, with over 75% reporting a cash flow crisis in the past year. Rising tariffs and the ongoing cost-of-living crisis have compelled many owners to withdraw from personal savings or secure business loans just to remain operational. If the situation doesn’t improve, it could lead to the closure of numerous businesses, adversely affecting everyday Australians.
Daniel Trkulja, a 27-year-old entrepreneur and founder of ThreadLAB, a premium apparel printing business, has faced tough times. Despite establishing his business in 2015, recent years have presented severe hurdles. He cites issues like tariffs and a decrease in market confidence—listen to complaints about late payments—resulting in an average annual loss of $24,000 due to late payments, as revealed by new research from Airwallex.
This strain is not just theoretical; Trkulja recently lost a client due to bankruptcy, leading to a significant loss of stock and finances. As cash flow remains fragile, high operating costs stemming from rising wages and rent compound the difficulties. An alarming survey indicates that more than half of small business owners have had to use personal savings for operational expenses within the last year.
Certain sectors, particularly those reliant on contracts like construction, are experiencing even greater hardship. Airwallex’s Matt Patterson notes the troubling trend of owners increasingly resorting to their savings, a sign of an escalating crisis. Over a third of businesses surveyed have taken out loans, yet many still find it insufficient to avert closure.
The frequency of businesses facing insolvency has surged in recent years, influenced by challenging economic conditions. Patterson warns of the inevitable repercussions, including reduced competition and increased prices for consumers. He asserts the need to protect small to medium businesses with robust support.
Trkulja feels privileged that ThreadLAB is well-established and can navigate these financial challenges, aided by financial technology solutions. However, he acknowledges that had these difficulties arisen earlier in his entrepreneurial journey, it might have spelled disaster for his business. The current trend illustrates a pressing need for systemic changes to foster a healthier environment for small to medium enterprises, which are crucial for Australia’s economic landscape. Without suitable support, many risk being left behind, with far-reaching impacts on both the businesses and their communities.