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Cash flow

Small firms tipped to slash spending ahead of June 30

By Michelle Hammond
Tuesday, 28 June 2011

Small businesses are set to slash their end-of-financial-year spending by an average of 15%, a new survey reveals, as interest rates, tax reforms and red tape continue to weaken business confidence.



The Council of Small Business of Australia, along with Telstra Business, enlisted the help of StollzNow Research to conduct a survey of Australian small businesses.



The Back to Business II study is based on the responses of 1,000 self-employed businesspeople with less than 200 full-time equivalent employees.  



The survey reveals that of the one-in-three companies that normally make outlays immediately before June 30, 55% plan to reduce their spending.



According to the survey, 59% of businesses plan to rein in their spending on plant and equipment, while 48% say they will cut back spending on information and communications technology.



A total of 35% say they plan to cut marketing and sales spending, while 34% plan to cut back on administration and 31% will reduce staff expenditure.



Meanwhile, only 14% of small businesses plan to spend more before June 30. Surprisingly, plant and equipment, along with information and communications technology, were nominated as the two most popular areas in which respondents planned to spend.



Deena Shiff, group managing director of Telstra Business, says it is worth noting how the businesses planning to spend are investing their money.



“45% of the businesses that are spending before the end of the financial year say that ICT is a key investment priority,” Shiff says.


“While replacing or upgrading old IT and telecommunications equipment is the biggest driver of that (90%), a large number (76%) are making this investment to increase productivity.


“This suggests that small businesses are acknowledging that they still need to keep ahead of the technology curve, even in unsure economic times.”



Peter Strong, executive director of the Council of Small Business of Australia, says he’s not surprised by the results of the survey.



“These results aren’t surprising given slow retail sales, our multi-speed economy and the number of unresolved policy issues on the political agenda,” Strong says.



“Expectations of interest rate rises, and lingering questions about the impact of an emissions trading scheme, are translating to insecurity in the economy’s engine room.”



According to the survey, 72% of small businesses identify interest rates as their biggest concern, followed closely by tax reforms at 69%.



Meanwhile, 65% say a carbon tax and emissions trading scheme is their biggest worry, while 60% identify the cost of finance as their biggest concern.

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