Small businesses are unlikely to receive a reprieve from tough conditions, with another potential interest rate hike looming and fuel costs continuing to climb.
The unfavourable economic climate has collided with a string of policy changes facing operators, who say a growing regulatory burden has only increased their costs.
The changes include the introduction of payday super, a ban on debit and credit surcharges, an increase to minimum and award wages, and reforms to how trusts will be taxed.
Industry associations have voiced concerns about the cumulative impact on small firms, creating additional red tape at a time businesses were already navigating higher costs.
"It's just killing us, killing our industry," builder Steve Bright told The Business.
He went into construction for the love of the trade, but running his own firm, a typical day at work now looks very different.
"Instead of getting out and building a house, we're spending more than half our time in an office doing paperwork," he said.
He is one of about 2.7 million small business owners navigating the current conditions.
Mr Bright has hired extra staff to help implement the policy changes in his business.
"We've got full-time people that do it now ... it's just another cost that we've got to wear."
Simon Croft from the Housing Industry Association said reforms have often been viewed in a "policy silo".
"It's that layering effect of simultaneous changes that then also … trickle down to their business operations."
Sunshine Coast designer and planner Debbie Johnson is rethinking her plans to pass her business onto her son after a tough year.
Debbie Johnson has run her small business on the Sunshine Coast for decades. (ABC News: Owen Jacques)
"I really don't know that as a mother, I would like to see [my son] coming in and taking this business over. It's not like you work 38 hours a week and you get your holiday pay and your sick pay," she said.
"It's very difficult when you want to deliver services for your clients and, I suppose, the regulations that you're working within keep changing because it's disruptive to your focus of what your core business is."
Cashflow crunch worsening
The data demonstrates the cashflow crunch facing businesses at the same time as they adapt to regulatory change. An increasing number have fallen behind on payments.
Credit reporting agency CreditorWatch found "serious arrears" hit an 8.5-year high in September.
Its latest Business Risk Index showed more than 50 per cent of invoices were not paid on time.
One in 10 invoices were more than 60 days overdue, which CreditorWatch chief executive Patrick Coghlan said was the highest level of "serious arrears" since April 2018.
Patrick Coghlan warns more business insolvencies could come next year. (ABC News: John Gunn)
"Even though we're at almost record insolvency levels, the indicators that we're seeing show that that's likely to increase,"
he said.
"It's rarely one decision that gets made or one event that takes place that knocks a business over.
"It's generally [the] cumulative effect of all of these changes that really just continues to put pressure on small businesses."
Inflation and interest rate squeeze
In a week, the Reserve Bank's interest rate setting board will decide whether to increase borrowing costs for a fifth time this year.
Like households, many businesses have been squeezed by high inflation and rising rates.
"The biggest single factor that is squeezing small business and the economy in general is higher fuel costs and therefore higher transport costs," said Westpac's chief economist, Luci Ellis.
The costs have then often been passed on to consumers, as with last month's ban on debit and credit surcharges, which saw hospitality venues increase their pricing.
"There have been a few instances of firms, particularly cafes, where it seems prices have increased even more [than the surcharge price]," Dr Ellis said.
"These are often places that have been dealing with other cost pressures, and this has just given them permission to adjust their prices."
Luci Ellis says the biggest impact on inflation is fuel prices. ( ABC News: John Gunn )
Economic concerns overshadow regulatory changes
A survey by small business accounting platform MYOB found 38 per cent of small businesses have seen a drop in revenue from a year ago.
Sixty-five per cent reported being concerned about cashflow for the coming year, and 69 per cent were worried about attracting new customers.
MYOB's chief executive, Paul Robson, said the payday super and surcharge policy changes have required small businesses to adapt.
"These two shifts have taken place within a relatively short period," he said.
"However, for the most part, our research suggests that concerns around regulatory changes are still behind cost factors including fuel, energy and interest rates."
The RBA estimates payment reforms will lower business costs by $910 million annually, but industry groups have reservations. (Unsplash: Blake Wisz)
Charlie Sheppeard, from competing accounting platform Xero, said slow sales growth in certain sectors made it harder to adapt to changes such as the surcharge ban.
"That leaves little room to absorb additional costs,"
he said.
"It is particularly challenging for sectors like retail and hospitality, where customer card transactions are common, and margins are already thin."
In a statement to the ABC, Small Business Minister Anne Aly said the government was aware businesses have been managing rising costs and adjusting to changes, and took the challenges seriously.
"That's why the Albanese Labor government is delivering billions in business tax relief," Dr Aly said, citing the $20,000 instant asset write-off being made permanent, and backing payment reforms, which the RBA has said will lower business costs by $910 million a year.
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