The latest report from the Westpac-Melbourne Institute has shed light on the state of consumer sentiment in Australia.
According to Westpac’s Consumer Sentiment report, there has been a significant increase of 9.4 per cent in consumer sentiment in April from the previous month. Specifically, the Index climbed from 78.4 in March to 85.8 in April, indicating a significant improvement in consumer sentiment. This upswing in sentiment has been attributed to the recent decision made by the RBA Board to pause.
While this news is positive, it is important to note that consumer confidence remains weak, sitting at 10.4 per cent below levels seen in April of last year, before the tightening cycle. However, the report also highlights a notable increase of 12.2 per cent in confidence levels amongst mortgage borrowers, indicating a potential rebound in the housing market.
Despite this, respondents remain cautious, with 34.11 per cent still expecting rates to increase by more than 1 per cent over the year, although this figure has decreased from the previous month’s 44.55 per cent.
Furthermore, there has been a surge in confidence regarding the outlook for house prices, with the House Price Expectations Index rising by 16.7 per cent. In fact, the House Price Expectations Index experienced an incredible 43 per cent increase from its low point in November of last year.
Small Biz sentiment check
The data from Westpac has indicated that consumer sentiment has reached its highest level since June 2022. This improvement in sentiment suggests that consumer spending is also on the rise. It is a positive sign for the economy, as increased consumer spending often boosts economic growth. However, while the Westpac report may be a positive indicator for the overall economy, it is worth examining the situation for small businesses.
While NAB’s data found that business conditions are currently above the long-term average and confidence has slightly strengthened, it is important to consider whether this is reflective of the situation for small businesses specifically.
Small businesses face unique challenges that can affect their ability to thrive, such as limited resources and increased competition. While the general economy is improving, small businesses may not see the same success. It is important to gather data related to small businesses to better understand their current situation.
According to Will Buckley, Country Manager at Xero Australia, small businesses are the backbone of the economy, but the road to recovery from the pandemic has created challenges.
“It’s important that we continue to support our small businesses however we can and for small business owners to continue to be proactive and put mechanisms in place to manage further economic challenges that could come their way,” he notes.
Buckley provides some tips for small business owners to manage their cash flow. “Maintaining healthy cash flow is one of the best ways for small business owners to manage their finances. Here are some tips for small business owners to manage their cash flow and three tips for those looking to support small businesses in their community”
Regularly revisit business plans and forecasts
SME owners must regularly revisit business plans and forecasts to understand business analytics better and ensure cash flow stays on track. Buckley suggests working with an accountant or advisor to create a business plan that works for the business.
“Business conditions can change rapidly, as evidenced by the pandemic. Regularly reviewing financials can help small business owners understand their position and be prepared for changes if they arise. Working with an accountant or advisor can be beneficial in creating a business plan that works for your business and ensures cash flow stays on track.”
Keep a solid cash reserve
In addition, Buckley emphasises the importance of keeping a solid cash reserve.
“The most critical thing small business owners can do to manage their cash flow is to have a cash reserve or emergency fund that can provide a cushion to manage unexpected events or bills. During difficult economic times, a cash reserve can help put businesses in a position of strength and give them the confidence to manage financial challenges as they arise.
“When conditions start to improve, a cash reserve can also be a source to help grow the business and take advantage of opportunities without having to worry about the financial position.”
Leverage technology
Buckley says that utilising technology saves time and money while gaining full visibility into the financial health of your business.
“Businesses that invest more in technology experience greater sales, fewer job losses, and increased payment times than those who invest less. With cloud-based accounting platforms like Xero, businesses can integrate banking and payment systems, track cash flow, and adopt new technology like eInvoicing to make payments faster and more secure. Other functions like marketing, inventory, and customer relationship management can be made more efficient by taking advantage of technology tools.”
Spread the word online
Buckley suggests spreading the word online through great reviews or sharing profiles on social media for those looking to support small businesses in their community. He also recommends shopping small when shopping for others and paying small businesses on time to avoid causing serious cash flow stress.
“Leaving a great review or sharing profiles on social media is a powerful way to help small businesses grow their customer base, particularly for online and e-commerce businesses. Recommending great local businesses or sharing recommendations in community forums and groups can drive customers to businesses within the area.
“Shop small when shopping for others: Small businesses can provide unique and thoughtful products when shopping for gifts or special occasions. Purchasing gift cards is another great option as they help to expand small businesses’ customer base further.”
Pay small businesses on time
Late payments are one of the central causes of cash flow stress for small businesses, with nearly half of all invoices to Australian small businesses paid late in 2021, costing $1.1 billion.
“Paying on time is one of the most important things people can do to support small businesses. Small business owners rely on money flowing into their business to pay their staff and feed their families, so late payments cause serious cash flow stress that can have a significant impact.”
Australia’s millions of small businesses face a busy year ahead. With continued support and the right plans in place, there is no doubt they will thrive. Small business owners can manage their finances by implementing the above tips. Those looking to support small businesses can do so in ways that don’t always involve spending money.
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