Supporting Economic Recovery: What we can do for small business
Small businesses are the backbone of the Australian economy, but have consistently faced weaker business conditions than larger firms in the last two years.
Our latest research for NAB shows how small businesses have been disproportionately burdened by red tape, late payments, capital constraints, and slow technology uptake. We identify eight key areas of reform to support the recovery and growth of small businesses:
- Making it easier to hire new workers: Hiring costs 5 times more for the first employee of a small business than for a large business. Cutting red tape and providing support could make it easier for small business to hire workers.
- Cutting regulation: Excess red tape costs small business $9.3 billion every year. Further focus on reducing regulation will give SMEs back time to work on their business rather than in the business.
- Making sure small businesses get paid faster: More than half of all invoices issued by small businesses to large businesses are paid late. Speeding up cash flow to small business can support small business growth.
- Harnessing the power of digital tools: Large firms adopt digital technology for key business processes at up to four times the rate of small businesses. SMEs need to be equipped with the incentives and support to adopt digital tools.
- Opening procurement opportunities: Small business only receives a quarter of government contracts despite accounting for more than half of all production. The sector would benefit from simplified tender processes and better access to government and corporate procurement opportunities.
- Further access to capital: Small business lending is growing at two-thirds the pace of lending to larger firms. One in five SMEs report difficulty accessing capital. Small businesses would benefit from greater access to a more diverse range of finance options.
- Lifting small business management capability: Small firms have half the overall management capability of larger firms. SMEs should be supported to enhance their management skills.
- Improving state business conditions: Small business conditions vary considerably across Australia’s states, due to differences in compliance requirements, infrastructure, access to capital and skills. There is an opportunity via National Cabinet to streamline and improve policy settings across states.