With inflation and interest rates rising, the cost of living is front of mind for many Australian SMEs, especially those faced with the unenviable choice of absorbing these costs or passing them on to their customers. According to the Australian Bureau of Statistics (ABS), nearly 46 per cent of all businesses experienced increases in their operating expenses in the last financial year, with 41 per cent facing supply chain disruptions causing lost revenue or customers.
Looking ahead, SMEs are likely to face similar challenges and must be prepared to adapt to these ongoing tumultuous conditions. Some of the biggest challenges facing SMEs in 2022 include:
Costs of managing the workforce
Like most organisations, one of the biggest challenges for SMEs is finding ways to improve efficiency while reducing costs. Tracking overhead costs can put SMEs in a better position to manage and reduce them. High staff turnover, employee onboarding, and repetitive administrative tasks are areas that can have a substantial financial burden on a business. For example, if SMEs experience high voluntary turnover, they will spend a significant amount of time and money on recruiting to fill the gaps. Instead, SMEs can trim overhead costs by implementing a unified software system that automates as many human resources (HR) processes as possible, including time-consuming onboarding processes. This can also help SMEs make data-driven decisions to unlock growth and improve their bottom line.
Staff shortages
SMEs continue to face staff shortages, with ABS data showing 31 per cent of businesses are struggling to hire suitable staff to fill jobs.2 Without qualified staff, SMEs struggle to maintain and improve employee engagement, and therefore also struggle to reduce turnover in a highly competitive market. Of the staff who remain, illness and unexpected absences create scheduling issues and leave businesses short-staffed, putting pressure on other staff to pick up the slack. SMEs should look to elevate the employee experience to attract and retain talent with automated solutions that keep future and current employees engaged and motivated.
Inflation spike
Australia’s growing inflation challenge is negatively affecting ill-prepared SMEs, with concerns that flow-on effects of increased wages will reduce job creation and make it harder for small businesses to avoid passing costs on to customers.3 High inflation and a potential recession affect not just employers but also employees, especially when it comes to pay, benefits, and workplace models. SMEs can cope in a high inflation environment by adjusting prices, prioritising high-profit-margin products, and keeping turnover rates low. For example, now is a great time for employers to consider financial support tools such as same-day pay and give employees access to earned wages, when and where they need them.
Constantly changing legislation
During the pandemic, the government made several amendments to Fair Work legislation, including rules around workplace rights and regulations around wage changes, sick leave, and pay slips. This has caused confusion with SMEs struggling to understand what to do to meet the requirements of the Fair Work Act, leaving themselves at risk of non-compliance. Navigating compliance in the face of constant regulatory change requires a proactive strategy. With the right technology, SMEs can streamline compliance processes and keep pace with new standards, while making a real difference in the lives of their employees.
In the face of uncertainty, it’s imperative that SMEs adapt to a changing landscape with smart choices that can enhance efficiencies without incurring additional costs. By implementing automated, self-service solutions that deliver streamlined and people-centric processes, SMEs can deliver a strong return on investment in a shorter timeframe and overcome key concerns facing businesses now and in the future. Failing to adapt to an ever-changing economy could leave SMEs unable to provide a people-first experience that could help them attract and retain the best talent.
