Australian small businesses low on confidence and still shaken by the effects of the global financial crisis may miss opportunities to thrive due to risk aversion, a recently released report concludes.

PKF Australia’s annual Business & Population Monitor focuses on what it terms the ‘middle sector’ (businesses pulled in two directions between the prospering resources sector and struggling trade-exposed industries) and forecasts conditions will remain tough for the rest of 2012.

However the benefits from the mining boom are set to permeate other areas of the economy soon, PKF predicts, and small businesses that don’t increase investment before then will miss out.

Businesses in the ‘middle sector’ (property, construction, housing, business services, finance, etc.) are still in “cost-containment” mode and have not been taking on staff or investing in buildings and equipment, but soon “will need to increase their level of investment to satisfy the increased demand for their goods and services”.

“Even for many businesses in the middle sector that have experienced an increase in demand, they have been reluctant to expand because ongoing concerns about the global economy and the general economic outlook have knocked their confidence,” the report says.

The report also cites the difficulties in accessing credit, and high business borrowing rates as factors deterring investment, but “one positive consequence of this is that businesses are now less geared than they were previously” and able to take on more debt when conditions improve.

“Capital expenditure growth for SMEs has fallen to its lowest level in 19 years, which indicates they haven’t invested in staff, equipment or buildings over the last couple of years as they maintain a holding pattern on investment,” PKF Australia’s Matt Field said.

“This lack of investment will come back to bite when things pick up in the second half of 2012 and many SMEs don’t have the infrastructure in place to respond to the increased demand.”

PKF advises middle sector businesses, especially small and medium-sized ones, seek other alternatives to short-term credit lines to ride out waves of negative confidence, pursue energy-saving initiatives to lower costs, and invest sooner rather than later if they have the required funding, to take advantage of shorter lead times.

PKF also warned the Federal Government to boost skilled migration in order to lessen the risk of stagnation in economic recovery, as more people transition into retirement.

Is your business planning to increase investment in the second half of 2012? If not, what factors are prohibiting you from doing so?

One of the major issues for businesses in recent times, especially small and medium-sized ones, has been access to finance and ongoing banking fees. It’s a complex area and there can be confusion about the best method to obtain the lowest fees and interest rates.

Many business owners don’t have the time, nor the desire, to investigate their banking arrangements and find out if they can save money to put into their business operations.

“Generally, existing arrangements reflect the past financing and banking needs and not necessarily current or even future needs,” writes Adam Field from Grant Thornton.

“So the start of having a better banking relationship and deal is to know exactly what you need now and in the future and to plan for that accordingly.”

The first step is to simply meet with your bank on a regular basis – once every six or 12 months is likely to be sufficient. In those meetings you can review the last few months of operations but also outline your plans for the next 12 months and beyond, and what you’re likely to require. These meetings don’t have to stem from any dissatisfaction, but just to increase awareness on both sides of what’s working, what’s not and what services you may require.

A crucial element in effective business banking is choosing an appropriate everyday business bank account. The type of account most suited to your business can depend on the industry you work in (ie. is it seasonally based, reliant on external factors like weather conditions, etc.?) and how much cash you’ll have in it at any given time.

Price comparison websites such as InfoChoice allow you to select the criteria relevant to your business and search for accounts with the best interest rates and a summary of set-up and ongoing fees. Most of these sites are comprehensive and include a wide range of providers. 

Don’t be afraid to discuss the results of your price comparison search with your current banking provider – it will provide them with extra information about where your banking needs lie, and it may help to unearth any room they have to negotiate on price.

A start-up owner may wish to use their own personal credit card for smaller expenses and emergency situations, but it may be prudent to investigate a business credit card. Though they typically have higher fees, you’ll likely receive a better interest rate and can consolidate all expenses through one card instead of multiple accounts.

Business consultant Susan Campbell writes it is common, and sometimes desirable, to split your services between two or more banks. Campbell has a list of how you should approach any formal review of banking arrangements, and advises that if contemplating changing banks to weigh up the associated fees and charges before making a final decision.

If you’re a new business, obtaining initial start-up funding is normally a huge challenge – we have blogged before on the issue and a previous ACCI proposal to introduce a temporary small business loan guarantee in 2010. While things have improved slightly since then, many businesses experience this issue. Ensure before you enter an arrangement with a bank that you are aware of its lending capacity, and how long it may take to approve any extension or increase of a loan.

As with most areas in life, the key to obtaining the most convenient and affordable banking arrangements is knowledge and, once armed with it, you’ll be in the best position possible.

VECCI members can access discounted merchant banking services with the Commonwealth Bank through the Business Saver program – click here for more information.

Almost 95 per cent of Australians who own a smartphone have used it to look up information about a product or service, according to new research commissioned by Google, which urged businesses to consider mobile websites to reach this growing part of the market.

The research found 52 per cent of Australians now own a smartphone, up from 37 per cent last year, while 28 per cent have directly bought a product or service on their phone.

Google’s Jason Pellegrino said similar research was conducted in 26 countries and Australia was one of the most advanced for smartphone usage.

While the majority of people said they’d only purchase online on their computer or laptop, a significant segment of the population are willing to act on the information they access on their phone and purchase immediately.

Pellegrino warned that businesses were at risk of falling behind consumer patterns in this area. Google estimates only about one fifth of all websites are ‘mobile-friendly’ and the research indicates many smartphone browsers would not return to a site they had trouble accessing.

Having a version of a business website that is accessible on smartphones is becoming an increasingly popular strategy for companies trying to expand their online presence. It does present an added cost for businesses but Pellegrino believes it can be as simple as having a ‘click to call’ button on the webpage or, for retailers, a simple page with a map of the location and opening hours.

Mashable and Social Media Examiner also provide some helpful tips for mobile websites.

Have your company’s products been purchased by someone using their phone? Have you or are you planning to launch a website for smartphones?

Australia has largely escaped the worst of the global financial crisis, which still threatens to cause havoc in Europe, while America still deals with issues too.

However, a new worldwide report reveals that Australian consumers are more likely than Americans or Europeans to be frugal and have insecurities about the economy. So what effect is that caution having on business?

The consumer sentiment report by Boston Consulting Group (BCG) surveyed 15,000 consumers across 16 major economies, including Australia. BCG concluded there was a worldwide trend towards saving more and spending less, due to frustrations with governments and job insecurity.

The conclusion should not come as a surprise, but what’s interesting is that these fears are just as pronounced in Australia as they are in countries in recession and with much higher rates of unemployment.

Forty-seven per cent of Australians feel financially insecure (a higher percentage than the UK), perceptions of job insecurity have risen and 50 per cent of people plan to spend less on discretionary items, more than in the UK or the USA.

Interestingly, Australians were much keener than people in other countries to remain frugal and keep saving even when the economy improves, confirming that new spending and saving patterns could be here to stay for quite some time.

BCG’s James Goth told the Financial Review that the Australian results indicated a “cocooning trend”, with a focus on “family, home, stability and calmness”.

There are obvious challenges that many businesses face due to this trend – with consumers more reluctant to spend on non-essential items, sales volumes and/or profit margins will decrease. But the trend does also include some opportunities, as consumers look for simpler experiences.

Melanie Gleeson, founder of a day spa franchise based in Melbourne, said her company’s revenue has climbed, allowing her to expand to 65 franchises in total. She believes this is due to a trend towards smaller luxury experiences, like a spa session, instead of a longer holiday.

Value for money is front and centre of the thoughts of any consumer’s discretionary spending, with Goth confirming the trend towards using price comparison services, seeking special offers and looking to internationally-based websites.

The Reserve Bank is doing its part to encourage consumers to open their wallets and purses with interest rate cuts, but the results of this survey indicate people are determined to save and won’t be embarking on spending sprees soon. But there will always remain opportunities for businesses that provide value and a quality experience to their customers.

Do you believe consumers are being more cautious with their spending now? What tactics are you using to entice people to spend on your business?

The forecast $1.5 billion surplus announced in the Federal Budget is welcome, but beyond the announced loss carry-back scheme and funding for the instant asset write-off for small business, there are few measures that will materially reduce business costs, boost employment prospects and tackle structural challenges facing the economy.

The redirection of the company tax cut is disappointing, so too is the absence of new infrastructure funding for vital Victorian major projects such as the East-West link, the Metro Rail project and the expansion of the Port of Hastings.

The Budget targets families and low income earners. As important as this is, it should have been geared towards growing the productive capacity of the economy and creating an environment that spurs new private sector investment and jobs creation.

The modest investment in skills targeted at mature aged workers and the disadvantaged is welcome, and so to is additional funding to encourage a maths and science focus in education.

New spending for families, tax cuts for low income earners, funding for a disability insurance scheme and support for aged and dental care are also positive initiatives of the Budget.

However, in reality the outlook has not improved for most businesses. The Budget represents a missed opportunity to tackle the many current challenges facing business including the looming carbon tax, impending higher superannuation contributions and the ongoing effects of global uncertainty and competition.

The attentions of Victorian business owners this week switch to Canberra ahead of the delivery of the Federal Budget, where significant savings are expected to be announced in order to achieve the budget’s promised return to surplus.

From a business perspective, the surplus will be pleasing, but only if the reduction in spending doesn’t weaken the economy or increase the cost of doing business.

Pressure has been eased on business with the Reserve Bank’s cut to the cash rate last week, and with business confidence still wavering, it’s vital that any savings are achieved with no disruptions to the operation of small businesses.

There are a range of potential initiatives that the Government can implement or begin to plan for to further reduce the business burden. Options include announcing a framework for broader tax reform or accelerating investment in skills, education and retraining.

In addition, there must be an answer to the confusion many business owners are experiencing about the planned phased increase in the superannuation contribution to 12 per cent, and potential wage trade off mechanisms that could assist employers with meeting the extra demand.

At a time when new carbon and mining taxes are being introduced, the superannuation levy increase is another added cost businesses will have to meet in the next few years, without any extra assistance – especially in Victoria, where the impact of the mining boom is not as pronounced.

Hopefully the Government recognises these business challenges and delivers a sensible, hard-headed budget that addresses them.

What do you want to see from the Federal Budget this year that would assist your business? Let us know.

The 2012-13 State Budget has recognised the challenges confronting business with a number of initiatives designed to lower costs and improve competitiveness.

The forecast $155 million surplus next year is welcome and will help retain the state’s AAA credit rating. That the Government has reduced its own size and cost without damaging frontline services is also positive.

At a time when business is under strain, the three per cent reduction in WorkCover premiums will benefit many Victorian employers.

The Budget acknowledges the need to support Victorian manufacturing and trade growth with a range of initiatives to improve access to government information, raise innovation and strengthen trade and investment ties.

Most importantly, the Budget retains a key focus on infrastructure with much needed funding for progression of the business case for the East West Link and planning and development of the Melbourne Metro rail project.

Funding for the preparation of the Port of Hastings expansion and the further development of Webb Dock represents important investment in meeting our future trade needs.

Our regions have not been left out with new funding to increase the capacity of the regional rail network, along with school, hospital and education upgrades that will underpin regional Victoria’s attraction as a place to live, work and invest.

Funding for Vocational and Educational Training is important to ensure that Victoria’s training sector continues to be industry-driven and of the highest quality.

The pluses for business in the Budget must not overshadow the need for ongoing reform. Much still needs to be done to cut red tape, explore options for state tax reform and encourage further private sector investment and job creation.

This article was also published in the Herald Sun on Wednesday 2 May, and VECCI’s Steven Wojtkiw spoke to ABC Radio’s Statewide Drive program about the Budget, which you can listen to here.

What were your thoughts on the State Budget?

With a crucial time ahead, Victorian businesses must be the state’s number one priority in tomorrow’s State Budget.

Reforms in the State Budget that champion business will be rewarded with faster rates of business start-up and expansion, accelerated investment and jobs growth, and greater productivity and innovation in markets at home and abroad.

Such benefits cannot be left to chance. They must be front and centre of the Budget and its policy and program reforms for business.

Trading conditions are tough for many business operators. Rising cost pressures have hit hard. Profitability is weak, cash-flow is tight, finance is less available and business and consumer confidence is fragile.

In this environment, both action and vision is needed to restore and build business confidence, boost business competitiveness and create an environment for business expansion, creativity and activity.

The Victorian economy and financial position is under pressure from global influences and weak domestic conditions, as well as an expected shortfall in our share of GST revenue.

While the likelihood of a ‘tough’ Budget is very real, business is looking to the State Government to do what it can to lower business costs, raise productivity and improve competitiveness.

Regulation reform must be accelerated and broadened. With the high Australian dollar and carbon tax looming, now is a critical time for the State Government to help Victorian businesses remain competitive by committing to improved regulatory design, assessment, administration and enforcement.

We urge the government not to introduce any new taxes, or raise existing taxes or charges in this Budget.

To secure Victoria’s longer term economic prosperity, the Budget signals a timely opportunity to support the recommendation of VCEC that the government develop a green paper that examines options for shifting the state’s revenue base toward more efficient, productivity enhancing taxes.

Business is also looking for continued proactive representation of Victoria’s interests in securing a fairer share of the distribution of GST revenue from the Commonwealth. This will reduce Victoria’s exposure to substantial fiscal shocks and improve our capacity to undertake meaningful state tax reform and/or continued infrastructure investment.

Further improvements are needed in the state’s infrastructure base. In the short term, key projects that need to be accelerated to address existing pressure points include the east-west road link between the Eastern and Tullamarine Freeways, the Melbourne Metro rail project and the extension of the Melbourne Exhibition Centre. Improved regional road, port and aviation links are also important, particularly for our tourism and food processing sectors.

While there are many other key focuses for business in the Budget, not least the importance of continuing responsible economic and financial management, taken in total, the Budget must add positively to the capacity of employers to not only maintain existing employment and investment levels, but confidently expand their operations into the future.

This article originally appeared in the Herald Sun on 28 April.

The latest VECCI-Commonwealth Bank Survey of Business Trends and Prospects has confirmed that Victorian businesses experienced a difficult start to 2012, and confidence on the outlook for the economy is weak.

In the March quarter 2012, a widespread decline in profitability was reported; manufacturers and retailers continued to experience difficult conditions and regionally-based businesses were particularly concerned about conditions over the year ahead.

With a less than rosy business outlook, the key question is what steps can be taken to at least reverse the trend and get business confidence heading in the right direction?

While there are global and national forces at play which are causing difficulties and uncertainty, it’s important to note that there are steps that can be taken.

The State and Commonwealth Governments must support businesses through practical actions that lower business costs, improve productivity and encourage private sector investment.

We believe that this should include a broad range of initiatives, including:

• Faster progress in reducing red tape for businesses, particularly small businesses, in areas such as waste policy, liquor licensing and a removal of overlap of consumer protection laws
• Continuing support to build new international trade opportunities for Victorian businesses in key markets like China and India.
• More efficient and effective education and training for industry to improve productivity, from a review of current state education curriculum frameworks, to assistance to initiatives to boost employment of people with a disability or chronic illness.
• A commitment to support private sector infrastructure development and the progression of major projects such as the East-West road link, improved links between regional centres and extension of the Melbourne Exhibition Centre.
• Strategic new investment to support Victoria’s regions, and tourism and events industries – including the implementation of natural icon infrastructure projects, to promote the state as a place full of great nature-based experiences.

Business confidence won’t be restored immediately, but practical steps in these areas will reduce the cost and regulatory burden of operating a business, open up new doors to growing international markets, increase the capacity of our workforce and ensure economic benefits are spread across the entire state of Victoria.

Victoria’s leading business group has urged the Baillieu Government to use the 2012 budget formulation process to ensure there is no unnecessary slippage in implementing pre-and-post election commitments important to business.

A number of significant reform options are currently before the government, embodied in the recommendations of reports by the Victorian Competition and Efficiency Commission (VCEC) and a range of other inquiries and reviews conducted in 2011. 

It’s important that the government responds to the specific recommendations of these reports in – or ideally before – the May 2012 State Budget.

The Government is to be commended for having already met a number of pre-election commitments to raise service standards in areas like law and order, health, education and public transport. The results of these initiatives will see spin-off benefits to the wider economy.

But at a time of great economic difficulty and uncertainty, business is looking to the State Government to do what it can to lower business costs, raise productivity and improve competitiveness.

VECCI is therefore calling on the Government to:

• Respond to the final VCEC reports into tourism and a state reform agenda.
• Release a formal Small Business Statement that outlines the policies, programs and services that the government will use to help small business grow.
• Report on achievements in realising the government’s stated red tape reduction target (annual scorecard).
• Respond to the second report of the Independent Review of State Finances (Vertigan Report).
• Respond to the final report of the Taxi Industry Inquiry.
• Announce details of the proposed new fire services property levy and how it will transition from the existing insurance-based model.
• Maintain funding for the Regional Growth Fund.
• Continue funding for the Energy Technology Innovation Strategy (ETIS) competitive grant funding program.
• Maintain water efficiency rebates, including those for small business.
• Continue to fund recycling and waste recovery initiatives across metropolitan and regional Victoria, including those in partnership with industry.

Visit ther VECCI website for a summary of our 2012-13 State Budget submission.