Amid persistent economic challenges, new research from global technology company Zoho found that almost half of Australian SMEs forecast an increase in their cashflow within the next 3-12 months.
Zoho’s Financial Health of Australian Small Businesses research highlighted the growing optimism with 46.6 per cent expecting their cashflow to increase in the next three to 12 months and even more are optimistic about their growth opportunities beyond that.
However, SMEs need to first overcome the high interest rates and inflation. Zoho found that 89 per cent of SMEs have seen their operating costs increase in the last 18 months. As a result, 78.1 per cent have been forced to increase their costs to protect their bottom line, but are seeing a subsequent reduction in customer spending. 73.9 per cent have seen their revenue slow, with four in ten saying it has slowed ‘significantly’.
“Small businesses are the backbone of Australia’s economy, driving innovation, creating jobs, and fueling local communities,” said Rakesh Prabhakar, Head of Zoho Australia and New Zealand. “However, many 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.
Prabhakar added, “Despite these challenges, green shoots of optimism are beginning to appear. Inflation recently hit a three-year low, while there is growing optimism that 2025 could see a series of rate cuts that – along with tax breaks in July – will boost consumer spending. We’re seeing this play out in our research, with almost half of small businesses forecasting an increased cashflow. Considering how much small businesses contribute to Australia both economically and socially, this positive indicator is very welcome.”
Zoho reported that 29.3 per cent of SMEs “see a lot of growth opportunity” in the next 12-18 months, while 33.7 per cent are cautiously optimistic and believe they’re “recovering nicely”. Of those that are forecasting a reduction in cashflow in the next 3-12 months, 35 per cent are certain they’ll be able to avoid cost-cutting for at least 12 months, while 37.4 per cent can meet their outgoings for six months without being forced to consider cutting costs. However, 6.9 per cent are already in a cost-cutting phase, and would be forced to seek support if costs slow further.
Zoho’s research also uncovered that aside from keeping their business afloat, the most urgent consideration for SMEs in 2025 is to automate or digitise their business. When it comes to their most important technology investments, 67.1 per cent said accounting and bookkeeping software. That was followed by marketing automation software (64.1 per cent), a Point of Sale (POS) system (56.2 per cent), a website (51.8 per cent) and Customer Relationship Management (CRM) (45.4 per cent).
“It’s perhaps unsurprising given the economic situation, to see the nature of technology that small businesses are prioritizing. Small businesses are investing in solutions that are focused on managing their financial bottom line and generating revenue and profitability.,” Prabhakar commented. “Through the combination of technology and cautious macroeconomic optimism, millions of small businesses have the foundation to navigate today’s pressures and position themselves for sustainable growth.”
