Here’s why small business clients need practitioner support

This article was current at the time of publication.

As small businesses emerged from the tough years of the pandemic, it was fair to assume that the only way was up. 

But while findings from CPA Australia’s 15th annual Asia-Pacific small business survey show that 2023 was a year of growth for most small businesses in the region, those in Australia experienced a weaker 12 months than expected. 

The findings show that 41 per cent of Australian small businesses grew last year, down 7 percentage points from 2022. That result was 14 percentage points lower than expected and the lowest result of the 11 markets surveyed.

Only half of Australian small businesses were satisfied or very satisfied with their financial return for the year and just 13 per cent increased their employee numbers.

This year is expected to deliver a small boost for Australian small businesses, with just over half anticipating their business to grow. But there are ways to improve their prospects for success. 

Managing ballooning costs

Gavan Ord, Senior Manager - Business and Investment Policy at CPA Australia, says ballooning costs proved a major challenge for Australian small businesses in 2023. 

Fifty per cent of Australian respondents cited increasing costs as having a major negative impact on their business. This compares to the survey average of 40 per cent. 

“In addition to higher costs, many Australian small businesses felt that the difficult economic environment was a barrier to their growth,” says Ord. 

“Increasing interest rates and cash flow challenges were also key challenges faced by many small businesses in Australia.”

Ord adds that there were factors where Australian businesses fell short compared with their Asia-Pacific counterparts.

“Australian small businesses are less likely to be exporting,” he says. “Innovation is another area where they are falling short compared to others in Asia-Pacific.”

Ord points to misconceptions around innovation that may be holding them back.

“I think the notion of innovation conjures up the idea of people in lab coats or a young tech entrepreneur wearing a T-shirt,” he says. 

“But almost all innovation is incremental. It could be as simple as changing a process or adding a new product or service to your offering.”

Australian SMEs fail on technology front

Technology continues to be a competitive advantage for the best performing small businesses throughout the Asia-Pacific. However, the survey shows those in Australia are much less likely to use the latest technology than their regional counterparts. 

The results show that those businesses that have significantly embraced technology are more likely to be growing. 

“Successful small businesses don’t just invest in technology to meet their compliance obligations... they use technology to sell their products and services online, to engage with customers and potential customers, and improve their performance. They also invest in protecting their systems from cyber-attacks,” says Ord.

The survey shows that fewer than 40 per cent of Australian small businesses earned more than 10 per cent of their revenue from online sales compared with 81 per cent of those in Hong Kong. 

Australia’s small businesses were the second least most likely not to use social media for business purposes. They were also second to last in receiving more than 10 per cent of sales through new digital and payment technologies such as PayPal and Apple Pay.

Strategic cost management

While increasing tech uptake can improve results in 2024, Ord says strategic cost management can also make a difference for Australian small businesses.

“Businesses need to be strategic about how, when and where they cut costs,” he says. “Putting arbitrary targets for cutting expenses, such as by five or ten per cent, can lead to an under-investment in growth areas and missed opportunities to make changes in under-performing areas.”

Ord notes that this is just one area where advisers can help their small business clients to succeed. He adds that the survey can also be used as a tool to prompt clients to improve their operations.

“Members can use the survey results to show their clients what are the characteristic of high growth business. This can kick start conversations about how to make critical changes to their business.”

Government support key

Ord adds that government also has a role to play in supporting Australian SMEs.

“Government can provide more information and support around technology adoption. This includes information around what technology might be best for their business,” he says. 

“There are government programs, but they only reach a small number of small businesses,” adds Ord. 

“We think the best way to reach more small businesses is by working with their advisers, whether that be their accountants or IT consultants. These advisers already have a trusted relationship with the small business and understand their needs.

“At the micro level, small businesses are extremely time poor and resource poor,” says Ord. “Accountants can make every minute count by having meaningful conversations about their growth and needs.”

Three ways advisers can help their SME clients to grow

1. Talk tech

Businesses that use technology are more likely to be growing. 

“Australian small businesses are less likely to be investing in technology and, when they do invest in technology, they're less likely to be generating a return on that investment,” says Ord. 

“Talk to your clients about their technology strategy and leverage your network for specialists who can help them.”

2. Explore strategic cost management

Small businesses must be strategic about cost cutting, says Ord.

“There’s a real opportunity to talk about the various areas of their business and where they can gain the most by cutting costs.”

3. Leverage report findings

Use the small business survey results to prompt conversations with clients about ways to boost performance.

“CPA Australia’s My Firm. My Future suite of resources also includes ways to offer more advisory services to clients,” says Ord.