SME Index: One year on
Key findings
- The past twelve months was full of extraordinary challenges for Australia’s small and medium enterprises (SMEs), who were forced to bring forward years of development, change the way they engaged with customers and transform staffing.
- Many SMEs built up buffers to ensure they had capital available – cash or credit. The GetCapital Cash Balance Index confirms that many SMEs managed to save money in the second half of the year to cushion themselves against future impacts or investment and growth opportunities.
- In the main, Government assistance landed when and where business needed.
- Each sector has had a different journey and while some are on the path to recovery, others are still suffering.
SMEs rise to multiple challenges
Government intervention helped keep SMEs afloat
Building a buffer despite the challenges
The recovery isn’t over yet – and for some it hasn’t even started
Flat, but it is the journey that counts
SMEs rise to multiple challenges
- Redesigning business models: Forced to immediately move away from in-person business, SMEs had to quickly figure out how to provide their services online without a drop in quality. This created a lot of work and significant stress. On the positive side, this transformation pulled forward years of development as businesses embraced digital innovation and learned how to provide personalised services online.
- Managing staff:: On top of a shifting business model, many business had to rapidly transition to a work-from-home arrangement for staff. This added another layer of adaptation to busy teams and prompted a rapid upgrade in technology for those not already equipped for remote working.
- Navigating difficult logistics: Many SMEs had to reconfigure their business space to accommodate for social distancing laws. They had to keep on top of frequent changes to these laws as outbreaks began and receded in each state, or risk fines for non-compliance. Businesses also moved to accepting card-only payments to minimise physical contact with customers.
An analysis of GetCapital’s SME data reveals two major findings during the second quarter of 2020. Firstly, and unsurprisingly, there was a heavy negative economic impact of government restrictions on SMEs around the country. Secondly, these negative impacts were not distributed equally among industries. Those that were slower (or found it more difficult) to change were impacted more harshly from top-to-bottom. Fitness and recreation, accommodation, manufacturing, wholesale and retail experienced the greatest falls in sales during this time – over 40% on average. The common factor among these industries is that their business models rely on in-person interactions or recurring revenue. Government restrictions hit fitness and recreation, accommodation the hardest.
Maximum Fall in Average Weekly Sales
Falls in average sales by sectorGovernment intervention helped keep SMEs afloat
SME Sales Index
JobKeeper recipients versus non-recipients report (July 2020)
SME Sales Index
Total fall for JobKeeper recipients vs non-recipientsIn March 2020 the RBA cut interest rates twice, taking the cash rate target to a record low. Between this and the positive impact of government stimulus payments, there was cautious optimism among SMEs at the end of the first half of 2020. Business and consumer confidence were both on the rise. Many SMEs were actively building their cash balances by cutting down on spending or deferring payments. All the signs pointed to a country that was ready to start growing again.
Then, in July, an outbreak of COVID-19 in Melbourne led to Victoria’s second and longest lockdown. While the restrictions were extremely successful in halting the virus, they came at a significant economic cost for the state. Victorian-based businesses experienced an average 15% drop in sales during their second lockdown. This came after Victoria outperformed the rest of the country during the national lockdown earlier in the year. It dealt the state a harsh lesson that not acting quickly enough to stem an outbreak could have severe repercussions.
Melbourne’s second lockdown hurt Victoria greatly
Comparison of Victoria during its two major lockdowns (the national lockdown in March and the state specific lockdown later in the year)Building a buffer despite the challenges
Building a buffer
GetCapital Cash Balance Index Report (October 2020)
The recovery isn’t over yet – and for some it hasn’t even started
Remarkably, the economy managed to end 2020 flat, or nearly flat, year-on-year (down 1%). As a result, many SMEs began 2021 with a clean slate – and an updated business model.
The economy ended 2020 where it began
Performance of the Australian economyHowever, there’s no doubt that there’s more pain ahead for others. Manufacturers are still impacted by hospitality venues and offices closing.⁴ International borders remain shut. Many Australians cancelled their travel at Christmas due to the Sydney northern beaches outbreak, and ongoing uncertainty with border closures continues to impact the accommodation and food sector. The fitness and recreation sector continues to struggle due to lockdowns and customer reluctance to return to enclosed spaces like gyms or indoor pools.
So where does that leave Australian businesses now? GetCapital data shows that even though 63% of SMEs maintained or improved their sales during 2020, this left 37%, or more than one in three SMEs, starting 2021 still trying to rebuild their business and recover from the financial setback.
Better off or worse off?
% of SMEs that are better/worse off as a function of salesFlat, but it is the journey that counts
While the SME Index ended where it started, many businesses are not in the same place or recovering at an equal pace. Our data points to a K-shaped recovery with some sectors well on the road to recovery, while others are lagging. For those better off, improved business processes introduced during the pandemic – be it resilience, digitisation or customer focus – should continue to benefit them going forward.
On the flipside, for those SMEs worse off, Government assistance may need to take on a more individualised approach. While many businesses will hopefully make it out the other side of the pandemic, there will undoubtedly be more casualties to come.
SMEs across Australia took extraordinary efforts to transform their business operations during unprecedented circumstances. While many businesses aren’t out of the woods yet, Australian business owners should acknowledge their resilience and persistence navigating extremely trying times in unchartered territory.
About the data
The data referenced in this report was calculated by taking a representative sample of businesses from around the country (varied by size, industry and location) and looking at their credit transactions across all account types (e.g. transactions, savings and credit cards). The index has been baselined to the start of the crisis and uses six months of average sales as the denominator.
GetCapital uses Bank Connect, a technology that leverages transaction bank data to facilitate faster credit decisions and make business finance simpler and frictionless for our partners and customers. Bank Connect allows bank statement data to be retrieved in encrypted form, adhering to the highest levels of data protection and security.