Almost a quarter of Western Australian small businesses are impacted by late payments of 30 days or more from larger companies resulting in cash flow challenges and increased levels of personal stress, a new Bankwest Curtin Economics Centre report has found.
The report, Back in Business?: WA small businesses and the impact of COVID-19, represents the most contemporary snapshot of WA’s small businesses, with new data collected to better understand the impact COVID-19 has had on small businesses in WA, whether they need greater support and how they viewed the future outlook at the end of 2020.
Report co-author and Bankwest Curtin Economics Centre Deputy Director Rebecca Cassells said small businesses are integral to the Australian economy, with more than 230,000 operating in WA alone, employing over half a million workers.
“COVID-19 has had a detrimental impact on the world and its economy, but this financial pressure is often felt more severely by small businesses which have fewer resources to draw on,” Associate Professor Cassells said.
“Our report found that coming into 2021, WA small businesses had a much more positive outlook for the year, with more than a quarter of small business owners expecting to employ additional workers over the next six months and only four per cent intending to apply for JobKeeper – down from 50 per cent in 2020.
“Revenue expectations were also high, with 37 per cent of small businesses expecting revenues to increase in the first half of 2021. This was especially the case for businesses in the construction and real estate sectors, but also those operating in hospitality and the arts.”
Associate Professor Cassells explained that this could all be quickly unravelled if shutdowns persist, hurting business and consumer confidence and weakening WA’s economic recovery trajectory.
“Almost 37 per cent of WA small businesses reported revenue losses due to COVID-19 in 2020. For many, the revenue impacts were severe with one in four businesses reporting revenue down by more than 25 per cent compared to the same time last year,” Associate Professor Cassells said.
“What we do know is that support measures such as JobKeeper, the ATO cash-flow boost and payroll tax relief were reported as being most helpful for small business owners during the 2020 COVID-19 lockdowns. These are important supports and give small businesses the ability to maintain operations and pay workers and other costs without any revenue coming in due to closures.”
Report co-author and Bankwest Curtin Economics Centre Director Professor Alan Duncan said that small businesses are also continue to face unnecessary stress due to late payments from larger companies.
“Our findings show that almost a quarter of WA small businesses face late payments of more than 30 days or more from larger firms, placing additional and unnecessary stress on small business owners, restricting cash flow and the ability to operate,” Professor Duncan said.
Professor Duncan said eliminating late payments would lead to around 13,100 fewer small business owners experiencing high or extreme stress.
“This report calls for action to address the ongoing issue of late payments for WA small business owners who have already experienced a challenging 12 months due to the COVID-19 pandemic. Mandated payment terms should be considered to improve this issue and increase the success of WA’s small business operators,” Professor Duncan said.
“Our findings are timely given the late payments legislation currently pending in the Federal Parliament, which aims to address this issue by ensuring small businesses are paid on time.”
Professor Duncan explained that there are also a number of ongoing issues that continue to impact small business owners such as lower quality infrastructure and skills shortages, especially in regional WA.
“We found that 38 per cent of WA small business owners, including 51 per cent in the accommodation and food services and manufacturing industries and 44 per cent in the construction sector, said it was harder to access labour compared to a pre-COVID economic climate,” Professor Duncan said.
“Small businesses operating in the Wheatbelt, Great Southern and Goldfields-Esperance regions also reported lower levels of satisfaction with infrastructure, particularly mobile phone coverage and data access, with only 37 per cent of small businesses in the Wheatbelt rating their mobile phone service as high quality, compared to 67.1 per cent in Perth. More than a quarter of small businesses in agriculture and accommodation and food services regard their internet and broadband service to be poor.
“Our report suggests improving the quality of mobile communications and data access to support regional small businesses, especially in the agriculture, accommodation and food services sectors, will help them to keep pace with new data technologies and improve their ability to produce and sell.”
Key findings from the report include: