Small business stays upbeat as storm clouds build

James Thornhill
08:45am June 06 2022

Westpac's head of business and consumer banking Chris de Bruin speaks on a panel at the Australian Financial Review's banking summit. (Emma Foster)

Small and medium-sized businesses are upbeat about their growth prospects and are showing strong demand for credit, even as storm clouds gather on the economic horizon. 

That was the view of a panel of business chiefs from three of the nation’s biggest banks at an Australian Financial Review summit last week. It’s a view backed by a Westpac-commissioned survey of more than 500 small enterprises conducted in May which showed 75 per cent expect their sales to rise over the next twelve months.

“On the business side, sentiment is extremely strong,” Chris de Bruin, Westpac’s head of business and consumer banking, told the summit. “Three-quarters of our customers are telling us that they are going to expand products and services in the near future, and that they want more capital to grow. So there is a bullishness there.”

The post-lockdown economy is gathering momentum, and companies see opportunities to take advantage of shifting demand patterns caused by the pandemic to diversify their revenue streams. 

Even so, 70 per cent of survey respondents were worried about the challenges ahead, with the rising cost of living and higher interest rates the biggest concerns. Many believe the worst of the COVID-19 pandemic is behind us, but remain wary of its potential for disruption. 

Andrew Irvine, National Australia Bank’s group executive, business and private banking, and de Bruin on the panel. (Emma Foster)

Global supply chain disruptions and skill shortages are an ongoing headache, but organizations are learning to adapt and position themselves for future growth, de Bruin said. That can include replacing overseas suppliers with local ones or boosting warehouse space to keep more inventory on hand.

Banks can do better in terms of granting SMEs access to finance, Andrew Irvine, National Australia Bank’s group executive, business and private banking, told the summit. 

The country’s banking system was advanced in global terms in areas such as payments and digitization, but still “pretty backward” when it comes to the provision of credit.

“It’s a huge opportunity for the Australian banking system to look at lending on risk characteristics undeprinned by transactional account data,” Irvine said. “You ask any small business owner and the most important thing for them is frictionless access to credit to grow and scale their business.”

For Westpac’s de Briun, strong data insights and analysis were key to helping clients make smart decisions as well as unlocking access to finance. “If we have data, we can lend more,” he said.  

As part of that data focus, Westpac is offering small business customers a free 12-month subscription to MYOB Business Lite and Pro. The cloud-based software helps to unify data streams across financial reporting, sales and operations, as well as simplifying payroll processes.

Nearly 90 per cent of small businesses that use management software such as MYOB said it had helped to boost their growth, the survey showed. Still, 42 per cent of respondents said they didn’t use any software, with many citing cost as the main barrier.

“Equipping small businesses with the tools they need beyond everyday banking will help business owners and operators have better oversight of their business’s financial position, to assist with planning and decision making,” said Mandy Rutherford, Westpac’s managing director for cash and transactional banking.

Westpac plans to integrate customer banking data within their MYOB account, she added.

“This will allow customers to view daily updated activity across their business term deposit, credit card and transactional accounts, for more convenient and transparent financial insights.”

 

James Thornhill

James Thornhill was appointed as editor of Westpac Wire in May 2022. Prior to joining the bank, he was a business and financial journalist with more than two decades of experience with international newswires. Most recently, he was a resources correspondent for Bloomberg, covering the mining and energy sectors, and previously reported on a broad range of topics from economics and politics to currency and bond markets. Originally from the UK, he’s had stints working in London, New York and Singapore, but is now happily settled in Sydney.

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