As we approach the end of 2024, it’s worth sparing a thought for Australia’s small business owners, many of whom will hopefully be taking a well-earned break. Because running a small business is tough, and fraught with risk.
Close to half of Australian small business owners have considered closing their doors in the past 12 months according to recent findings by the Australian Chamber of Commerce and Industry. A staggeringly large number by any measure, and one which has considerable socio-economic implications.
At its heart, small business closures are the dashed hopes and dreams of everyday Australians who have poured their passion, money, and sweat into forging something of their own.
Communities also lose connection points - from local cafes, shops, hairdressers, fitness trainers, restaurants – as small businesses play an important role in bringing people together.
At a macroeconomic level, small businesses account for 98 per cent of all Australian businesses, employ close to half of the private sector workforce, and contribute around 30 per cent of the nation’s GDP. When small businesses falter, the entire economy feels the repercussions, and countless Australians lose their jobs.
The reasons small businesses don’t survive are, of course, many and varied. In many cases, the fundamental business concept and execution might not be right. But what we also know, is that too many owners struggle to administer their business. And it’s a reason many meet their demise, even if they offer a valued and in-demand product or service.
What’s also apparent is that small business owners aren’t getting the service and support they need to operate their business. And banks are arguably the main culprit – we’re often a hindrance rather than a help.
Research shows many small business owners are dissatisfied with their banking relationships. This stems from several factors, including difficulty navigating banking systems, a lack of integrated digital tools, limited after-hours support, and product offerings that don’t align with the realities of running a small business.
Australian banks must do better for small business owners. How we do this is by first taking the time to understand the issues keeping them up at night.
Small business owners are the ultimate multitaskers. They handle bookkeeping, marketing, HR, compliance, and customer service – all while delivering their core product or service. This dispersion of focus often stifles growth, with owners struggling to allocate adequate time and resources to strategic initiatives, and critically, their customers.
Amid these responsibilities, it’s no surprise that time is in short supply for small business owners. According to a Xero Small Business Insights study, 72% of Australian small business owners work more than 50 hours per week, with many pushing beyond 60 hours. A large chunk of this is swallowed by administrative tasks – chasing invoices, reconciling accounts, and navigating complex banking systems – rather than building their business.
But arguably the number one challenge for small businesses, particularly in the early years, is cashflow. The RBA has reported that around 40% of small businesses regularly struggle with cashflow, with late payments a major culprit. The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has estimated these late payments cost small businesses about $115 billion annually in working capital. This liquidity squeeze can transform what should be a growth phase into a survival battle.
Red tape is another costly annoyance. The ACCI reports that 82% of small businesses believe regulatory compliance negatively impacts their operations, adding up to around $20 billion in costs annually. Compliance demands time, expertise, and money – resources that small businesses would rather invest in innovation, marketing, or hiring.
Cyber threats also loom increasingly large for small businesses, with the Australian Cyber Security Centre reporting that 43% of cyberattacks target small businesses. Without the robust protections of larger enterprises, small businesses face significant operational and financial risk from cyber-attacks.
Banks are better positioned than any other service provider to solve many of these challenges. Rather than perpetuating the sleep deprivation for business owners, we can deliver solutions that simplify, streamline, and secure many of these tasks.
By delivering a seamless, mobile-friendly platform accessible 24/7, banks can reduce time wasted on administrative banking tasks. Recognising that the individual is – in effect – the business, we need to offer a single sign-in that allows for ease of visibility and connection between business and personal accounts. We also must provide faster application processes for loans, and the ability to access real-time assistance at any hour would make a meaningful difference. Automation and human support, working in tandem, can enable business owners to tackle banking tasks when it suits them – whether that’s first thing in the morning, late at night, or between on-site jobs.
Banks should also look to integrate this mobile technology with accounting and invoicing software to offer features like automated payment reminders, instant invoice reconciliation, and real-time financial dashboards. Simple, flexible lines of credit or overdraft facilities can also smooth out short-term liquidity gaps, preventing late payments from spiralling into existential threats.
And, importantly, banks can leverage their security expertise to protect small businesses. By offering secure payment gateways, robust fraud detection, and real-time alerts, banks can help prevent financial loss. Additionally, providing education on cyber hygiene – two-factor authentication, regular software updates, data backups – would enable businesses to build their own defences with confidence.
The entrepreneurial spirit of Australia’s small business community fuels local economies, fosters innovation, and enriches our lives. It’s time that banks step up, embracing technology and small business-centric design to help these vital enterprises not only survive – but prosper.
First published in The Australian, 23 December 2024.
