Almost one quarter (22%) of SME leaders say their business currently has no cash reserves at all and 18% are reliant on less than a months’ worth of expenses, according to new research from YouGov, commissioned by online small business lender, Prospa. 

“The current economic conditions are such that small businesses are getting further away from the three to six months’ cash reserves recommended to cover operating expenses,” Prospa co-founder and chief revenue officer, Beau Bertoli said.

“We’re seeing a particular strain on the retail and hospitality industries, which have been disproportionately impacted by a decrease in discretionary spending, supply chain cost increases and rising fuel and energy expenses.”

Yet, Australian business leaders are proving their resilience to adverse market conditions by taking a solutions-first approach. 

Overall, more than three in four (77%) Australian business owners and decision makers say their business already has or are likely to actively adopt strategies in the next 12 months to manage the impact of rising costs.

While over two in five (43%) plan to reduce non-essential expenses and 38% are likely to increase their prices in the next 12 months, nearly one in five (17%) of metro-based businesses cite an increased support for technology adoption. 

“Technology will be a crucial lifeline for small businesses as they map out their cashflow over the coming months. Streamlining manual backend tasks and harnessing technology to create admin efficiencies will have a direct impact on the productivity – and therefore profitability – of the business,” Bortoli added.

However, nearly half (46%) say they have reduced their own income, and a further 31% have had to dip into their personal funds to pay business expenses.

Despite switching or likely to switch in the next 12 months to lower-cost suppliers (19%), reducing their pay or bonus (12%), and even reducing their operating hours (11%), the toll taken is on mental health. Almost half (44%) note increased stress or burnout and nearly one-third (29%) cite less time to spend with friends and family due to rising costs and a challenging economic environment.