Originally published in The Canberra Times
By Bruce Billson
What's going on for small business right now? We have seen the first quarterly improvement since August 2022, suggesting that conditions might be stabilising and the most difficult days are possibly behind us.
But we need to do more to make sure we get the best out of the small business economy for both our national wellbeing and community benefit.
The ASBFEO Pulse small business health index has recorded its first (albeit microscopic) improvement since August 2022. Both the most recent MYOB Bi-Annual Business Monitor and last week's Creditor Watch May Business Risk index are also showing some signs of improvement.
However, the enterprising people running small businesses around the country are still being smashed with high cost-of-doing-business pressures, legislation and compliance complexity, lack of law and regulation harmonisation across the various levels of government, as well as ongoing cyber and tech concerns to name just a few.
Small business owners have been telling me just how difficult it is to navigate the complex workplace laws and the anxiety this creates because they are so fearful of getting it wrong. This fear and worry extend to managing staff and independent contractors' superannuation entitlements and obligations.
A lack of visibility about what law changes are coming down the pipe and when they might take effect also keeps small business owners awake at night. Not to mention if and when small businesses will be consulted on any changes. We detect a shift in concern from staff availability to affordability. These worries are being exacerbated by the increases in payroll tax and expected wage rises.
Small and family business owners are also concerned about the wide range of local, state, and federal regulations that they need to understand and comply with. These include permits for home-based businesses, transferring licenses for work across state borders, difficulty with business registrations, product labelling laws, tax obligations and differentiating between business and domain names.
Cash flow continues to be a serious concern for small businesses. While many are starting to feel that the worst may be over with moderating inflation pressures, improving consumer sentiment and a small uptick in optimism following the Reserve Bank of Australia's recent reductions in the target cash rate, businesses are looking to adjust prices and review what they offer to improve viability.
Rising requests for ASBFEO's help reflect these cash flow concerns and in the May ASBFEO Pulse, payment disputes continue to be the most common dispute managed by my office.
In many of the payment dispute cases, the business customer has told the small business supplier that they can't afford to pay them. This non-payment can put a small or family business with modest cash reserves in a precarious position and lead to more worry about running their business.
It is just one dimension of many creating viability concerns for too many small businesses contemplating their futures.
We really need to address the deteriorating risk-reward balance confronting many small and family businesses. Targeted and tailored incentives and a renewed commitment to "right-sized" regulation will help to restore the "drive" in the "engine room of our economy".
Supporting investment in small businesses through targeted tax incentives would be a great place to start. We know that it is in the early years of a business when cash-flow crunch can threaten financially vulnerable and undermine business growth and sustainability.
A tax discount or offset scheme, allowing new businesses to retain more of their initial earnings over the first three years of an enterprise, would reward entrepreneurial and risk-taking, and support growth and reinvestment in the business.
Making the instant asset write-off measure more generous and durable, and restoring the tax incentives to support digitisation, technology deployment, and energy efficiency and electrification initiatives are actions that will support greater capital investment by SMEs in productivity-enhancing, innovation-generating and viability-improving capability.
Every well-intentioned change by Parliament or regulators risks adding to the mountain of red tape that gets between the owner, the business they lead and the customers they need to attract and delight. That is why right-sizing regulation is an important policy imperative and discipline that should be paramount to reviews and reform, where possible.
There's been a flurry of new workplace laws and compliance obligations, and cascading reporting requirements relating to modern slavery and climate-related financial disclosures, adding to what we call "white tape" - where big business is insisting on more and more information from small business suppliers.
Small and family businesses recognise their responsibilities but need a right-sized, actionable, fit-for-purpose, and efficient approach to compliance impositions with appropriate support and guidance.
A simple improvement that governments at all levels across the country can make immediately is to require every submission to cabinet to include a small business impact statement. Preliminary and formal regulatory impact assessments and new policy proposals should start with and focus on small business implications, not consider this as an afterthought, if at all. This would mean every time a decision is made, small business will be front of mind and bright on the radar screen.
We can and need to herald the importance of small and family business to the economy and our communities. We can powerfully send a clear message that small-businesspeople matter and are valued by creating the Prime Minister's Small Business Awards to celebrate excellence and achievement and inspire the next generation.
Small and family businesses need to be front of mind for our policy makers and regulators. We need to constantly renew and re-nourish our commitment to providing the best possible environment for small and family business success.
And let's never forget that lifting productivity and improving economic performance, innovation and business resilience happen at the workplace, and 93 per cent of employing businesses are small businesses.
When contemplating how best to drive the economic resilience and productivity improvements, energising enterprise through small business is a great place to start.