MYOB spokesperson Jo Tozer said high inflation has taken an increasing toll on sentiment. Photo: 123rf
Rising costs, interest rates and ultimately recession could break a rising number of small- and medium-sized businesses (SME), according to a new survey.
Business software company MYOB's business monitor of more than 1000 businesses showed more than a third would struggle to stay afloat for six months before having to use their personal finances or get additional finance.
The SMEs said their overheads such as rent, fuel and power had increased by more than $1500 a month in the past year, with only 13 percent saying their costs had held steady.
MYOB spokesperson Jo Tozer said high inflation has taken an increasing toll on sentiment.
"Across the country, SME leaders have pointed to rising inflation and the high cost of living generating the most pressure, with three-quarters saying it was having the biggest impact on their level of confidence.
"Tough trading conditions and falling consumer confidence have also seen local SMEs struggle to achieve revenue growth over the last year, and profitability in the last quarter has become particularly constrained."
A third said they were concerned to some degree about the effect of rising interest rates on their business finances, a fifth described their cashflow levels as poor or very poor, while 35 percent said cashflow was good.
Forty-five percent of respondents said they were less profitable over the past three months, with only 13 percent reporting improved profits.
"In this sort of low-growth environment, where businesses are dealing with increasing cost pressures, SMEs are finding themselves with dwindling cash reserves, and becoming more vulnerable to a growing number of external shocks - from natural disasters to a downturn in the economy," Tozer said.
Broader economic sentiment was strongly negative with 69 percent picking a weaker economy in the coming year, and 80 percent concerned about recession, with 11 percent saying they would likely close.
Tozer said businesses were already cutting costs and if a recession occurred would see earnings and profits cut, and might result in staff being lost.
"This is a critical moment for many SMEs, as they face the risk of recession with very little in the way of resources to give them a buffer against a major downturn in trade."