Australian small businesses stuck in digital dark ages: CPA

Australian small businesses are less likely to invest in, use, earn from or offer customers the use of digital technologies than their Asia-Pacific counterparts, according to CPA Australia, the professional accounting organisation. CPA Australia surveyed 4,227 businesses in 11 markets about their operations and plans. Australian small businesses won the “wooden spoon” for digital transformation:

Least likely to begin or increase online sales during COVID-19 – Australia

Least likely to use social media for business – Australia

Least likely to invest in technology in 2020 – Australia

Least likely to profit from their investment in technology - Australia

Least likely to review cyber-security in past six months – Australia

In addition, Australian small businesses were the second least likely to earn revenue from online sales and third least likely to offer customers the choice of digital payment technologies.

CPA Australia Chief Executive Officer Andrew Hunter labelled the results disappointing, saying; “Other markets made major in-roads on digital transformation during the pandemic. Clearly, Australian small businesses need more help than they’re getting to leave the digital dark ages behind.”

Unsurprisingly, most businesses in the region reported that COVID-19 had a major impact on their business. However, the consequences appear to have been felt slightly more strongly in Australia.

Only 22.3 per cent of Australian small businesses grew last year – the second lowest result of any market surveyed. Only 8.3 per cent of Australian small businesses added employees – the lowest result.

Despite the impact of COVID-19, 36.1 per cent of Australian small businesses reported they made no “major change” in response to the pandemic, the highest result of any market surveyed. They did not, for example, access government support, negotiate rent reductions or loan holidays, delay taxation payments or reduce capital expenditure.

Given that many Australian small businesses overlooked these relatively simple actions, it is unsurprising that more complex digital transformation did not occur. However, the consequences are profound.

Hunter said, “There is a clear link between innovation and performance. Our survey shows that growing businesses are more likely to use new technologies, e-commerce and social media. These are areas in which Australian small businesses performed poorly.”

“This digital divide will make Australia’s road to economic recovery longer and tougher than it needs to be. If Australian small businesses don’t transform, sales will go to more innovative competitors overseas.”

Australian small businesses expect to fare better in 2021, however, they may still underperform other Asia-Pacific businesses. Only 41.4 per cent of Australian small businesses expect to grow this year compared with the survey average of 60.8 per cent. Thirteen per cent expect to increase employees numbers, compared with the survey average of 35 per cent.

Failure to innovate is likely to continue to hold Australian businesses back. Only 6.7 per cent of Australian small businesses say they will introduce a product, process or service that is unique to their market or the world in 2021, compared with 23 per cent in other markets.

Hunter urged the government to show greater support for digital transformation, “While businesses should play an active role in digital transformation, the government needs to play a bigger role in helping businesses manage this change.”

“Ad hoc financial support for digital transformation isn’t sufficient. There needs to be a significant commitment of public funding to help Australian small businesses transform.”

CPA Australia called on the government to invest in improving the digital capability of small businesses in our 2021-22 Federal Budget submission.

On the question of how much is needed to fund digital transformation, Hunter said “Given how far behind Australian businesses are, the level of investment needed to bridge the digital divide is quite substantial. For example, last year Singapore announced an AU$325 million program to support local businesses with digital transformation.”

Download CPA Australia Asia-Pacific Small Business Survey 2020-2021.