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WA’s small businesses will not escape the same economic challenges facing the Eastern States in the new financial year, with experts warning it will be a case of survival of the fittest.
Patrick Coghlan, chief executive of analysts CreditorWatch, said WA was in a strong economic position but challenges would remain, particularly around labour shortages in the construction and hospitality sectors.
“There’s still challenges around making sure builders and developers can actually get people to deliver the jobs,” Mr Coghlan said.
“While material prices are coming down, they are still elevated. (Builders) who have a balance of fixed-rate contracts in place are still doing it really tough and are probably losing money on those deals.
“(Small businesses shouldn’t) rest on the historical norms that have shown that certain States or industries have performed better because I think it has the potential to turn and get ugly quite quickly.”
Mr Coghlan expects businesses in the hospitality, retail and arts and recreation sectors will face significant risks in the year ahead after the Reserve Bank of Australia this month in a bid to bring down inflation squeezed household budget further by lifting rates for a 12th time in just over a year.
“It’s actually probably that more middle-of-the-road offerings that are going to do it really tough as consumers spend less and look to tighten up their purse strings,” he said.
“There’s still no clear indication when those (interest rate) increases will stop. Until we’ve got that clarity, there’s going to be a lot of instability in the market.”
Deyana Wroth, general manager of Karrinyup cafe Little Laika, said the effects of rising interest rates was already evident. While the cafe still served the same number of customers, they were now spending less.
“Our customers are being more conservative. Instead of getting a big breakfast, they are getting an egg on toast,” she said.
Ms Wroth said the cafe was focusing on marketing activations to ensure its survival. This included a high-tea special and $10 burger and beer night every Friday.
Luke Achterstraat, chief executive of the Council of Small Business Organisations Australia, believed small firms would face a double economic whammy in the new financial year.
He said the Fair Work Commission’s 5.75 per cent pay rise for Australia’s lowest-paid workers, effective July 1, came at a time when small businesses could least afford it.
“We’ve got a perfect storm of (rising) energy costs, rental costs have gone up, even insurance premiums,” Mr Achterstraat said.
Mr Coghlan warned small businesses would need to remain diligent in optimising cash flow and recognising early indicators of insolvency.
“Get back to basics from a (money) collection perspective,” he said. “If you don’t ask for money, you’re less likely to get paid and a lot of businesses still make that mistake by waiting a long time to actually request payment.”
Mr Coghlan suggested small firms set up an automated system to collect the bulk of payments.
Mr Achterstraat also urged small businesses to ensure cybersecurity systems were in place as soon as possible.
“Small businesses need to be aware that it’s not always the big end of town who are targeted by hackers and scammers,” he said.
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