When Auld Lang Syne plays at the stroke of midnight this year, there will be a sense of hope and relief for many small businesses.
Next year promises to deliver better opportunities than the previous two, as the spectre of the pandemic lifts, vaccination rates improve, borders re-open and the threat of lockdowns starts to (hopefully) fade away.
It means there should be economic opportunities for SMEs to begin to grow again, rather than just survive, which will be the over-arching theme of 2022 for small businesses.
The Australian economy is projected to improve
There is no doubt that 2020 and 2021 have presented enormous challenges for small businesses. There is expected to be hope on the horizon, with Federal Treasurer expected to announce upgraded economic forecasts at the Mid-Year Economic and Fiscal Outlook that will be delivered before the end of the year.
“The market is coming back strongly,” Mr Frydenberg told the ABC in early December. “That comes as a result of the fact that we now have one of the highest vaccination rates in the world, one of the lowest mortality rates in the world.”
Leading economists are predicting the Australian economy will grow by 3.8 per cent next year while the Reserve Bank of Australia is also predicting 5.5 per cent growth that comes on the heels of three per cent growth in 2022. While these are not massive numbers, they are cause for optimism for small businesses that have been battling for the last two years.
Australian eCommerce is going to continue to boom
If any small businesses were thinking the eCommerce trend was isolated to COVID-19 lockdowns, think again. Forecasts for 2022 indicate that the domestic eCommerce market will expand to $21.7 billion AUD – up from $13.9 billion in 2017. This is going to be a global trend, with the worldwide eCommerce market set to double to $6.5 billion by 2023.
While getting used to shopping online during COVID restrictions may have helped accelerate eCommerce spending, it is not the only driving factor. Improvements in technology and digital marketing reaching audiences on advanced smartphones, tablets and other devices means that consumers now have access to high-quality, targeted information that helps keep them informed and feeds them information when they are motivated to purchase while on the run.
The quality of eCommerce sites has improved as well, with the use of technologies like augmented reality (AR) allowing small businesses to give virtual tours and examples of products and services. Small businesses in Australia will need to embrace eCommerce and boost their marketing efforts to reach their slice of the online market or risk getting left behind.
Small businesses will need to spend more
It is understandable that many small businesses have put complete freezes on spending to survive the COVID tsunami, but it is forecast that SMEs will become less afraid of spending and borrowing in 2022.
That is not to say the floodgates will open, any needless spending will still be well and truly reined in. Striking a balance between cost-cutting measures and necessary spending will be a tightrope that all SMEs will have to tread carefully.
Two of the key areas where spending is expected to increase are for eCommerce and marketing operations so that businesses can invest in digital campaigns to reach more customers and start to grow again.
Supply chains will remain an issue
Global supply chains have been heavily disrupted by COVID-19, shipping container costs have soared and securing inventory has been unpredictable and unreliable. While this is expected to recover somewhat in 2022, it won’t be an overnight fix.
This means that SMEs are going to have to explore their options. Those that rely exclusively on inventory from overseas will need to look at local markets for backup, while it is also recommended trying to strike deals directly with manufacturers to help expedite inventory shipping processes and help make supply chains more reliable.
SMEs are also expected to go leaner and meaner when it comes to total stock inventory. This is because of the rising costs and unreliability of supply chains. Until these stabilise, finding other ways to make your supply chain more robust and reliable should be a priority in 2022.
Anthony McPhee, Principal
B.Bus (Accy) QUT | FCPA, SSA (SMSF Specialist Advisor with the SMSF Association) & Registered Tax Agent
Anthony has over 25 years accountancy, taxation and superannuation (SMSF) experience. He eagerly welcomes a challenge and his passion is in small business accounting, superannuation, consulting and taxation advice. He provides real business benefits for each of his clients and is well regarded for his succinct and accurate accounting skills. Anthony is also a self-managed superannuation fund (SMSF) specialist with Australia’s leading SMSF body, The SMSF Association.