Late payments of 30 days or more are making it harder for Western Australian businesses, including those in the manufacturing industry, to gain access to labour and capital amid the pandemic, a new Bankwest Curtin Economics Centre report found.
In the report entitled Back in Business?: WA small businesses and the impact of COVID-19, analysts revealed that chances of employment and revenue gains will be hurt if shutdowns persist, hurting business and consumer confidence and weakening WA’s economic recovery trajectory.
With over 230,000 small businesses operating in WA alone, the so-called ‘engine room’ for growth and employment remains integral to the Australian community, said report co-author and Bankwest Curtin Economics Centre Deputy Director Rebecca Cassells.
“COVID-19 has had a detrimental impact on the world and its economy, but this financial pressure is often felt more severely by small businesses which have fewer resources to draw on,” Cassells said.
Pandemic-related restrictions could potentially disrupt labour and capital supply.
According to the 2020 BCEC Small Business Survey, 38 per cent of business owners reported that it was harder to access labour. The was even higher for businesses in manufacturing industries, capping at 51 per cent.
Capital intensive industries such as manufacturing (31%), mining (29%), and construction (26%) reported the highest rates when asked about the difficulty of sourcing labour.
However, the report also revealed that small businesses in the manufacturing sector were more likely to report a net increase in employee count due to COVID-19.
In terms of the ability to access sufficient cash flow to weather the pandemic, small businesses in manufacturing were more likely to report having less than three months of cash to support operations.
More than half (58.5%) of small businesses in WA regularly suffer from late payments, with three quarters of businesses in manufacturing, retail trade and arts and recreation services regularly suffering payment delays.
According to Professor Duncan, eliminating late payment would lead to 13,1000 fewer small business owners experiencing high or extreme stress.
“This report calls for action to address the ongoing issue of late payments for WA small business owners who have already experienced a challenging 12 months due to the COVID-19 pandemic. Mandated payment terms should be considered to improve this issue and increase the success of WA’s small business operators,” Professor Duncan said.