Based on current conditions, owners. of more than a third of small and medium-sized businesses would struggle to stay afloat for six months before they need to dip into their personal finances or seek additional finance, according to new data from the 2023 MYOB Business Monitor.

The nationwide survey of more than 1000 small and medium-sized (SME) business owners, directors and managers highlights that the ongoing impact of inflation and the Reserve Bank’s efforts to control it-are taking their toll on businesses.

On average, SMEs estimate their overheads, such as rent and electric-ity, have increased by more than $1500 a month in the past year, with just 13 per cent saying they haven’t seen their costs increase in that time.

A third said they were “quite” or “very” concerned about the impact of increasing interest rates on their busi-ness finances.

Just over a fifth (21 per cent) say their current cashflow levels are poor or very poor, while 44 per cent say they are satisfactory and just 35 per cent say their cashflow levels are good.

“Across the country, SME leaders have pointed to rising inflation and the high cost of living generating the most pressure,” said MYOB’s Jo Tozer.

“Tough trading conditions and falling consumer confidence have also seen local SMEs struggle to achieve revenue growth over the last year, and profitability in the last quarter has become particularly con-strained”

Forty-five per cent of SMEs report that their business has become less profitable over the past three months, while 41 per cent say it has stay’ed the same.

In contrast just 13 per cent say their business has become more profitable over this time.

“In this sort of low-growth environ-ment, where businesses are dealing with increasing cost pressures, SMEs are finding themselves with dwind-ling ‘cash reserves, and becoming more vulnerable to a growing num-
ber of external shocks — from natural disasters to a downturn in the econ-omy,” Tozer said

More than two-thirds (69 per cent) of SMEs believe the economy will decline in the next 12 months, one percentage point more than at the same time last year, with 30 per cent believing the decline will be significant.

Just 16 per cent of SME decision-makers expect the economy to im-prove — the same proportion as seen in the 2022 Business Monitor — and 13 per cent believe it will remain the same.

Recession warnings were flashing red for the SME community, with 80 per cent polled saying they were concerned about the risk of a re-cession in 2023, Tozer said.

“If this occurs, the survey insights show it could generate a wave of cost-cutting among SMEs, which will fur-ther limit local groWth.”.

When asked what changes they would make to their business plans or operations if New Zealand was to enter a recession, the Business Moni-tor insights revealed 38 per cent said they would be implementing strict cost controls.

Some 29 per cent would dip into personal savings to keep trading and 18 per cent would reduce marketing spending to save money.

Freezing wages or salaries was an option for 14 per. cent, and the same percentage highlighted that they would need to increase the time it takes to pay bills.

A recession would mean closing the business altogether, according to 11 per cent of respondents.

“This is a critical moment for many SMEs, as they face ttie risk of re-cession with very little in the way of resources to give them a buffer against a major downturn in trade,” Tozer said