Small businesses need to be paid on time

Small businesses need to be paid on time

Small businesses have been referred to as the engine room for growth - but they are also the engine room for jobs, employing millions of workers across Australia.

The impact of COVID-19 has been felt across the economy, but for small businesses these shocks can be even more challenging, with fewer resources to draw from.

Curtin University's economics centre has captured new data to understand what impact COVID-19 has had on small businesses, whether they have the supports needed to succeed, and how they see the future outlook.

One of the strongest take-homes from the survey was the degree of optimism shown by the small business sector heading into 2021.

More than a quarter of small business owners expected to employ additional workers over the first six months of 2021 and only four per cent had intentions to apply for JobKeeper - down from almost 50 per cent previously accessing the scheme.

However, this could all be quickly unravelled in the event of shutdowns, hurting business and consumer confidence and weakening economic recovery.

In Western Australia, almost 37 per cent of small businesses reported revenue losses due to COVID-19 in 2020. For many the revenue impacts were severe, with one in four reporting revenue down by more than 25 per cent.

Cash flow is critical to small business operations. If their operations are heavily restricted or they are forced to close, cash flow falls rapidly.

Supports can and have helped. JobKeeper, the Australian Tax Office cash boost and payroll tax relief were reported as being the most helpful for small business owners during the 2020 lockdowns.

These supports give small businesses the ability to maintain operations and pay workers and other costs without any revenue coming in.

Being paid on time by larger businesses will also help relieve cash flow issues, minimising the stress that small business owners are facing.

Almost a quarter of 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.

In fact, these businesses are up to 11 percentage points more likely to suffer high stress compared to businesses who are paid on time.

If we eliminated late payments, this would lead to about 13,000 fewer small business owners experiencing high or extreme stress.

Legislation pending in the Federal Parliament aims to address this issue by ensuring small businesses are paid on time. This would result in huge benefits.

Associate Professor Rebecca Cassells and Professor Alan Duncan are from the Bankwest Curtin Economics Centre.

This story Small businesses need to be paid on time first appeared on The Canberra Times.