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Australian small businesses are predicting an increase in their cash flow over the next three to 12 months despite persistent economic pressures.
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SME cash flow confidence for 2025 is on the rise, Zoho reveals
11 December 2024
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New research from Zoho revealed the vast majority of small businesses were struggling as 80 per cent had been forced to increase prices based on operational costs and interest rates over the last year.
Aside from continued challenges, almost half of Australian small businesses have forecasted their cash flow levels to increase throughout 2025.
Zoho said the research, Financial Health of Australian Small Businesses, aimed to understand the extent of rising costs and interest rates, and how they had impacted the 2.5 million small- to medium-sized enterprises (SMEs) in Australia.
The research follows the recent spike in insolvency numbers with over 11,000 businesses entering insolvency in FY2023–24, according to statistics from ASIC.
Zoho head of Australia and New Zealand, Rakesh Prabhakar, said small businesses were the backbone of Australia’s economy, driving innovation, creating jobs and fuelling local communities.
“Many SMEs are facing a perfect storm of rising operational costs, interest rates and ongoing supply chain disruptions, creating an environment that remains incredibly challenging. As a result, many small businesses have no choice but to pass the increased costs onto their customers,” he said.
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“Despite these challenges, green shoots of optimism are beginning to appear. We’re seeing this play out in our research, with almost half of small businesses forecasting an increased cash flow. Considering how much small businesses contribute to Australia both economically and socially, this positive indicator is very welcome.”
The research found that 89 per cent of businesses had seen an increase in operational costs over the last 18 months, which forced 78.1 per cent to increase their costs to protect their bottom line.
Almost 74 per cent said revenue had significantly slowed as a direct cause of increased prices and costs, yet 46.6 per cent said cash flow would rise based on growing optimism that an inflection point had been reached.
The data reflected that 29.3 per cent of small businesses forecasted significant growth opportunities over the next 12-18 months, 33.7 per cent were cautiously optimistic and said they were “recovering nicely.”
Twenty-seven per cent of businesses, on the other hand, predicted a decrease in cash flow over the next 12 months which would bring varied implications, according to Zoho.
Thirty-five per cent of businesses who had predicted a reduction in cash flow said they would be able to avoid cutting costs, while 37.4 per cent said they would only be able to avoid it for six months.
Director at Light & Glo, Jeeva Sanjeevan, said 2024 presented its fair share of challenges for many businesses, yet many were ready to enter the new year with fresh confidence.
“However, despite contending with rising costs and shifting customer habits, we’ve tackled the challenges head-on and emerged stronger,” he said.
“While we know challenges will continue, we’re confident about the future, thanks to our solid strategy and the technology that underpins our operations. With the peak holiday season upon us, we’re ready to build momentum and set the stage for a successful 2025.”
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