Small business can lead our COVID recovery – if the environment is right

MYOB CEO Greg Ellis. Source: Supplied.

Driving a post-COVID economic recovery presents a once in a generation opportunity for government to make changes that will significantly benefit Australia’s largest private sector group: small business. MYOB calculates that enhancing the digital capability of Australia’s 2.4 million small businesses could increase the SME contribution to the Australian economy by 20.8 per cent and in doing so, increase employment opportunities for Australians at a critical time for the country.

Small and medium sized businesses are often described as Australia’s economic engine room. They are a significant employer of 4.8 million Australians (44 per cent) and major GDP contributor (57 per cent). However, not only were 85 per cent of SMEs in a state of unpreparedness for a disruption like a pandemic, they are also most at risk of COVID-19 aftershock without structural reform.

SME survival and success are economic imperatives for Australia. Future job creation does not sit with the largest companies. It’s with the small business that becomes medium-sized; with every two to five new employees a SME recruits. Professional services alone have grown exponentially in recent years, with job vacancies increasing 56.5 per cent between 2013 and 2018; the bulk of these businesses small to medium in size. SMEs hold the key to Australia’s job growth opportunity.

Digital adoption is crucial to the success of our small businesses. This is not just building a website; these are digital processes and systems that help businesses run more effectively to be competitive in a local and global market. We know that SMEs with advanced levels of digital engagement are 50 per cent more likely to grow revenue and earn 60 per cent more revenue per employee.

The Morrison Government’s assistance to small businesses through JobKeeper and JobSeeker has helped safeguard the health and livelihoods of Australians, many in small business. Pursuing the payment times reporting framework as a priority for Minister Michaelia Cash and Australian Small Business Family Enterprise Ombudsman Kate Carnell has also aided the sector’s confidence in the Government to give them a focus equal to their contribution. Small business can finally see that due recognition is literally paid.

Now we need to provide SMEs with a structured framework to adopt digital in areas with profound impact on business recovery. By adopting legislation which mandates digital adoption in hand with the provision of incentives for uptake, in a way that favours quality, homegrown Australian technology companies, we create a thriving Australian digital ecosystem in which SMEs and a competitive Australian technology sector can flourish.

There are two steps Government could take to kickstart this SME-led recovery.

Step one: set the right framework

eInvoicing

The Government has successfully introduced legislative reforms that support small business digital transition, including Single Touch Payroll, SuperStream and the New Payments Platform. Progress has been made toward the introduction of eInvoicing by enabling faster payments of invoices sent electronically. Now we need to go further.

Late payments are identified as the greatest contributor to SME cashflow complications – and MYOB research shows cashflow causes 44 per cent of SMEs extreme pressure. Compacted by a reduction in trade, this issue could have the most significant impact on SME recovery post-COVID-19. Key to solving this issue is mandating eInvoicing, staggering by industry for faster adoption.

Digital identity

Equally essential is affording SMEs the confidence to trade online without fear of fraud. Ninety per cent of Australian businesses were targeted by cyber fraud in 2017, and in the US, 27 per cent of online sales are fraudulent transactions9.

However, identity regulations are currently more suited to traditional face-to-face interactions, such as in-store credit card payments, rather than online sales.

A digital identification system would support the protection of SMEs from fraudulent liability, giving SMEs the ability to confidently offer services to customers without risk and, through the application of one-time identity verification, a streamlined approval experience for customers, from onboarding to point of purchase.

Step two: attract adoption

The Small Business Digital Champions initiative found the top three reasons Australian SMEs delayed digitising their admin processes were cost, time and complexity. However, the top three reasons for SMEs adopting technology were cost savings, consistency and to free up time for staff.

An incentive to enter the digital ecosystem will help SMEs overcome the key cost barrier and allow them to concentrate on the benefits digitisation brings.

While the Instant Asset Write Off is an excellent program for physical technology assets, such as hardware and servers, with business moving to the cloud, policy should now seek to accelerate cloud transition.

Tax incentives for SMEs to increase adoption of essential digital tools would serve benefits to both SMEs and Government. Singapore’s introduction of a Digital Resilience Bonus of up to $10,000 to help food and retail SMEs boosted digital capabilities post-COVID – with the key to unlocking the grant being the software producing a return on investment for SMEs.

These measures taken together will boost essential digital adoption by Australia’s 2.4 million SMEs and provide substantial benefit to their productivity. SMEs make up much of the fabric of our local communities and daily lives and as a nation we do well if our SMEs can start, survive and ultimately succeed. Global recovery depends on it.

Greg Ellis is CEO, MYOB