Accountants urged to prepare SME clients for economic upturn
Businesses are facing difficult times at the moment but will need to shift their mindset once economic conditions pick up again, says Xero economist.
Small businesses have been dealing with a challenging couple of years with headwinds such as higher inflation, global uncertainty, supply chain disruptions and staff shortages making it difficult to run a business, said Xero economist Louise Southall.
Speaking at Xerocon in Sydney this week, Ms Southall said there are a number of trends at the moment creating challenges for businesses at the moment.
“Firstly, even in countries that aren’t officially in recession, economies are still barely growing. Obviously when people are reluctant to spend it’s really hard to grow your small business,” she said.
“Inflation is also still hanging around. The situation is much better than it was but prices are still rising faster than they normally would, particularly outside of North America.
“That’s making it really tough for small businesses to manage their costs.”
A combination of low growth and high inflation has left many small businesses between a “rock and a hard place” with businesses trying to cover these costs to stay profitable but not deter customers with high prices, she said.
Staffing is also still a challenge for many small businesses with labour markets still feeling some hangover effects from the pandemic.
“Normally when economic growth is this low, we would expect unemployment rates to be much higher and so it should be much easier for small businesses to fund the staff they need but labour markets are behaving in ways that we wouldn’t expect,” said Ms Southall.
“In many countries, we have seen job vacancy levels come off so far this year, but they're still so much higher than they were before the pandemic. In Singapore for example, vacancies are still nearly double what they were in late 2019.”
In Australia and New Zealand, participation rates are still at record highs as more people take advantage of flexible and hybrid working arrangements.
However, despite the many economic headwinds facing businesses at the moment, Ms Southall said accountants should start preparing their small business clients for when economic conditions actually improve.
“While we know accountants are absolutely focused on getting their clients through this really tough period, we also know they’ve always got their eye on the future,” she said.
“Looking ahead, it’s still unclear when economic growth will start to improve. It’s going to happen at different paces in different industries and countries but many forecasters are expecting by this time next year we should be starting to see some improvement in economic activity.”
This means that accountants may need to start thinking about how to get their clients prepared for when that next upturn does happen, she said.
“I appreciate right now that with business conditions as tough as they are, it may seem overly optimistic to be even thinking about an economic upturn but there’s a reason we talk about the economic cycle. Economies slow and then they do start to grow again and these tough times will end,” said Ms Southall.
“You will need to make a shift in your mindset from dealing with the next problem to unlocking the next possibility and you can get your clients prepared right now.”
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