Australian SMEs continue to benefit from healthy business conditions and confidence levels as we settle into the second half of the year.
However, the latest NAB Quarterly SME Survey revealed a downward trend in both conditions and confidence that may give some business owners pause for thought. Optimism has slipped for three consecutive quarters, despite remaining slightly above the long-term average.
36 per cent of SMEs consider client losses the biggest risk to their business.
So what is worrying SMEs? QBE's Business Risk Report has outlined key risk areas for the country's small and medium-sized firms.
1. Losing clients
More than one-third (36 per cent) of SMEs consider client losses the biggest risk to their business. Millennials and Generation Z are less loyal to brands than their parents and grandparents, which means SMEs must constantly be at the top of their game to prevent client and consumer churn.
2. Late payments
The impact of late payments on SMEs is a topic we've explored on our blog before, and the QBE research shows 24 per cent of business owners are worried about unsettled invoices piling up. The good news is that organisations are paying debts quicker than ever, with the average late payment dropping to 11.7 days in March 2018, according to illion figures.
3. Rising costs
Wages, rent, energy costs and other expenses are on the rise in Australia, placing increasing pressure on SME cash flow. The QBE survey showed one-fifth of businesses cited this as their biggest concern, rising to 38 per cent for retailers.
4. Power cuts, fires and other natural disasters
Australia is prone to natural disasters, with bush fires, floods, storms and other adverse events costing the country approximately $18.2 billion a year in the decade leading up to 2016. The research, conducted by Deloitte, forecast the price tag will rise to $39 billion each year by 2050. Is your SME prepared for the impact of natural disasters on business continuity?
5. Major clients going bankrupt
Unfortunately, both corporate and personal insolvencies are on the rise. In the March 2018 quarter, 5.5 per cent more businesses shut down than in the same three-month period in 2017, ASIC recently revealed. While only 6 per cent of SME owners chose this as the most pressing threat to their operation, the figure is likely to rise if insolvencies continue to grow.
Just 17 per cent of small owners hold business interruption insurance, according to new QBE research. But could your business survive a power cut, weather event or fire? Read QBE's latest Business Risk Report now: https://t.co/ADWS5OeytL
— QBE Australia (@QBEaus) April 10, 2018
Are you ready to strengthen your risk management?
If any of the above threats are keeping you awake at night, now may be the time to consider your risk management processes.
At WMC Accounting, we can identify major risk factors to your business, develop a sophisticated strategy and implement new risk management procedures where necessary. Contact us today to book an appointment.