The Australian Small Business and Family Enterprise Ombudsman has released a study into factors impacting small to medium enterprise investment.
Speaking at the Institute of Public Accountants national conference, Ombudsman Kate Carnell said barriers to investment included access to capital, red tape and energy prices.
Carnell said removing barriers to investment would give small businesses confidence to grow and boost jobs.
Despite recent claims by bank executives that lending to small firms is booming, Carnell said this wasn’t the case for borrowers who don’t have equity in property.
“Traditional bank loans are backed by real property mortgages and although alternatives are emerging, they are not currently mature and affordable,” she said.
“Young aspiring small business operators are particularly disadvantaged and increasingly rely on their parents to provide seed finance.”
Carnell said this meant the “Bank of Mum and Dad” was often called on to help young entrepreneurs.
“This offers convenience and flexibility, but it puts people’s retirement savings at risk,” she said.
“It also raises social equity issues in that the children of affluent parents have greater opportunities to buy and grow businesses.”
Carnell said a government-backed guarantee scheme could be the answer, similar to the British Business Bank.
The Ombudsman’s study also takes aim at red tape, saying past reduction efforts have largely been “window dressing”.
Carnell said a successful pilot in Parramatta, west of Sydney, to make compliance requirements seamless should be extended to other areas.
“It was found there were more than 50 pieces of regulation which applied to setting up a hospitality business in Parramatta and the regulation meant it took up to 18 months to commence trading,” she said.
“Regulation wasn’t removed, but was instead sped up and made invisible. Information provided once was used to automatically complete forms in other areas of bureaucracy.
“This is a smart way of using systems and technology to relieve regulatory burdens on business.”
One initiative that will make a difference for small business is the government's decision to pay invoices within 20 calendar days instead of the current policy of 30 days.
The policy, which has been welcomed by Consult Australia, an industry body representing thousands of consulting firms in the built environment, begins July 1, 2018. It covers invoices for contracts worth up to $1 million.
Consult Australia CEO, Megan Motto, said small business is big business for the built environment and the Australian economy.
"Cutting red tape and making it easier to manage cash flow turns government into an enabler for small business – critical for industry confidence, our country’s competitiveness, and subsequently economic growth," Motto said.
The decision follows the Australian Small Business and Family Enterprise Ombudsman’s report into payment times and practices.
“The government spends billions each year on infrastructure alone, and whilst many of our large firms have the resource to work with the system, too many of our small firms feel they have to work against the system," Motto said.
"For sole trader and small practice engineers, architects, and planners, time is money and their level of administrative burden, be it through contracts or managing debts, can be the difference between thriving or simply surviving.”
Consult Australia represents some 48 000 firms of which 72% are defined as ‘small’ with less than 20 employees. In 2015, the organisation published a report into the ‘Economic Benefits of Better Procurement Practices’ which identified $240 million of savings per year through better procurement practices alone.
“We hear a lot about the government being a model litigant when it comes to procurement reform. This announcement is a step towards the government becoming a model client,” she said.