Op-Ed

Understanding the skills to handle business barneys

Olivia Pearce — Sun, 01 Sep 2024 23:19:36 +0000

Understanding the skills to handle business barneys Olivia Pearce Mon, 09/02/2024 - 09:19

02 September 2024

Opinion piece by the Ombudsman Bruce Billson.

Originally published in the Canberra Times.

Mary runs a small civil construction business but one of her customers, another small business, had not paid their $20,000 bill for 180 days.

The delay, well beyond the usual payment terms of 30 days, was having significant flow-on consequences for Mary as it left her without sufficient cash to pay her suppliers.

After repeated attempts to contact the company that owed her money and even offering a payment plan because she wanted to keep the other business as an ongoing customer, Mary called the assistance team at my agency, the Australian �Թ�� and Family Enterprise Ombudsman.

Our case manager got involved and Mary was paid the full amount she was owed.

Mary was lucky but sometimes the result is not as good, and the business might never be paid what they are owed.

Over the past year, small and family business owners have become increasingly worried about being paid as they face challenging business conditions which has seen a record number of corporate insolvencies.

Requests to my agency from distressed business owners who are fearful another business who owes them money has become insolvent or who are worried about their own ability to meet their financial commitments has jumped by 50 per cent.

Payment disputes are by far the greatest area of concern for small businesses and now account for more than two out of five of our assistance cases.

The construction industry had the highest number of payment disputes, while those in the hospitality sector tripled over the past 12 months.

Payment disputes are an early warning sign of a cash flow problem and can have a ripple effect that threatens the viability of other businesses.

Cash flow is the oxygen of enterprise, but difficult conditions mean when one party is late in paying, it can cascade through the supply chain.

Vicky, who runs an events business, was owed $10,000 by another business who had stopped paying her and had cut off any communication. She called us and we provided advice which got the two businesses talking again. They were able to work out a payment plan and preserve their commercial arrangement.

Similarly, Anthony, who runs a TV repair business, contacted us when another business he had been working with for five years, suddenly stopped paying him. We helped negotiate a payment plan so both businesses could stay afloat.

Many businesses are drawing on their cash buffers to keep their business afloat. Recent surveys have found nearly one-in-four small businesses have no cash reserves and 18 per cent have less than a month's cash at hand to fulfil their obligations.

The business owner will usually pay themselves last after paying their bills and staff, so slow payment can needlessly amplify the risks of business ownership.

For small and family business owners, their identities are interwoven into their business and the stakes are so much higher than just a job. Many have invested a lifetime - and put their life savings and family home on the line - to build up their business. Nearly half of outstanding small business debts are secured by residential property.

Matthew nearly lost his home when he took out a loan, secured by the property, to pay other debts for his business with a lender who was not a member of the Australian Financial Complaints Authority. After defaulting on the loan, he contacted us and we discovered he had already paid more in loan repayments than the total loan. The lender agreed to waive the remaining debt and remove the security over the home. Before taking out any new loans, Matthew said he'd do the quick online check to ensure a lender is an AFCA member.

Many entrepreneurs seek to build their business online. This has opened a world of possibilities to win customers. Julie uses a well-known social media digital platform to run her small consulting business, but she was hacked and locked out of her account.

The hackers used Julie's credit card that was linked to the account to fraudulently ring up hundreds of dollars of charges.

Julie was left stranded because the digital platform told her she needed to log in to her account to report that she was locked out of her account.

Julie is one of hundreds of small business owners who have faced this problem over the past year and, after contacting us, we were able to get her account reinstated and the fraudulent charges on her credit card refunded.

The number of small businesses having problems with a digital platform has more than doubled since July 2022 and now accounts for one-in-four of our cases.

Since being created eight years ago, ASBFEO has handled almost 47,000 cases, most of which involve disputes small businesses have with other businesses or Australian government agencies.

We strive to help small businesses get back to business as fast as possible. Pleasingly, nearly two-thirds of the cases that come to us are helped quickly by our call centre or assistance team providing useful information and guidance.

Some cases take longer and the ASBFEO assistance team provide intense one-to-one assistance with no cost or low-cost solutions. This has included arranging alternative dispute resolution, such as mediation.

About 20 per cent of requests for assistance relate to contract disputes, while 9 per cent involve a franchise disagreement.

This often relates to contract renewals, breach of franchise agreement or early termination.

We can give small businesses the skills - and sometimes case management - to resolve a dispute without ending the business relationship.

In many cases they want to keep doing business but need to find a way through the dispute.

We can't guarantee every small business will succeed but it is our mission to provide all the help we can for those who want to start, grow or transform a business, and that no business fails because the owners didn't know about something that might have helped.

Small and family businesses can find more information and how to get help on the ASBFEO website - asbfeo.gov.au - where they can also subscribe to our monthly newsletter.

*The names of business owners have been changed.

Small businesses must prepare for the upcoming 3G shutdown

Olivia Pearce — Sun, 18 Aug 2024 22:27:03 +0000

Small businesses must prepare for the upcoming 3G shutdown Olivia Pearce Mon, 08/19/2024 - 08:27

19 August 2024

Opinion piece by the Ombudsman Bruce Billson.

Originally published in the Canberra Times.

Small, family and farming businesses should urgently make sure they are not caught out by the 3G switch-off which is now scheduled to take place on 28 October.

This is about far more than upgrading an old 3G phone.

I fear many small businesses are unaware of the scope of this event and the possible business-harming disconnection and technology dysfunction they may face.

My message is this: check the functionality of your technology so you're not a 3G casualty.

Many of us just do not realise there is an awful lot of technology and equipment used every day that's actually enabled by 3G.

Quite understandably, we're thinking about what the piece of kit actually does and the time-saving or technology-enhancing way it allows us to get on with business.

Yet, the 3G switch-off could have sweeping business consequences.

It may disable older-style EFTPOS terminals and tap-to-pay pads we see at car park exits and vending machines while vital equipment and software, including those relating to record-keeping, accounts, bookings and payroll, could stop working.

At risk may be security systems and cameras, tablets, telephones in elevators, fire alarms and even swipe pads at car parking stations.

Asset-tracking tools, surveying instruments, water and environmental monitoring, farm gates and many other wireless operating systems may also cease functioning.

There are also very serious safety concerns about people who rely on 3G for medical monitors and sensors and to make sure calls can still be made to emergency services.

Many people may not know their home or business may be riddled with embedded devices relying on 3G until it's too late.

I'm sounding a warning to small businesses to be aware this is a possibility and to do something about it now.

The use of 3G is extremely broad, and one of the things of most concern is it is not immediately obvious. It would be terrible if the first time you learn about that is when it shuts down, and that might be critical to your business operations.

You might be selling miniature goats at regional shows and relying on a mobile EFTPOS machine. You might use remote monitoring of water levels in a dam, be assessing microclimates in a vineyard or opening and shutting gates. You might even have a surveying station called a Total Station. Or you might be tracking assets and trucks for a freight company or simply trying to buy a Pepsi Max from a vending machine.

A security system might be looking after your premises, and all of a sudden there's no link back to the base station and no remote observation capability.

Even some 4G-enabled devices have aspects that are powered by 3G and some 4G mobile phones default to 3G for emergency calls.

Telstra and Optus have responded to concerns that too many people are not aware and not ready for the switch-off by announcing they will delay the shutdown that had been scheduled for the end of this month to now take place on October 28.

They are promising to mount one last push for mass public awareness.

This must include actions to improve awareness 3G use is embedded in business equipment and technology in small, family and farming businesses. It can't just be more of the same in the hope people become aware of it through serendipity.

We need a coordinated education and awareness campaign by telecommunications companies and technology manufacturers and suppliers aimed at improving awareness and action among small businesses and explaining the wide-ranging effects and options to upgrade or replace their equipment as soon as possible.

Surely the telcos are best-placed to know who is using 3G for reasons other than making phone calls and have data about who is currently paying the bill for use of that spectrum.

As the 'most likely to know' party and the commercial beneficiaries of the reuse of 3G spectrum, it is not unreasonable for telcos to lean-in, identify customers using 3G for other-than-call purposes and to work with business equipment providers to make sure small, family and farming businesses are not left stranded after the shutdown.

It is pleasing Telstra has reviewed its billing data to see which third-party equipment and service vendors are still paying for the use of 3G spectrum, urging these vendors to reach out to unsuspecting customers.

In the extended window before the 3G turn-off, Telstra, Optus and the third-party vendors of services and equipment still using 3G need to redouble their efforts to connect with impacted customers before they are disconnected from vital small, family and farming business capabilities.

For the businesses that aren't sure how a vital piece of equipment, machinery, kit, technology or service communicates wirelessly with another location to do what it does, don't be left wondering.

Make a call to the vendor and ask the question: "Will the end of 3G impact on me?"

The extension of time must be used wisely.

We can't just let the shot clock run down and then have an awful lot of distressed business owners on October 29 saying: "Hey, my stuff doesn't work."

Bruce Billson is the Australian �Թ�� and Family Enterprise Ombudsman.

Small biz needs all the help it can get

Olivia Pearce — Fri, 09 Aug 2024 02:21:47 +0000

Small biz needs all the help it can get Olivia Pearce Fri, 08/09/2024 - 12:21

08 August 2024

Opinion piece by the Ombudsman Bruce Billson.

Originally published in the Daily Telegraph.

Small business is a big deal. But not as big as it used to be. Economic contribution has dropped from 40 per cent to 33 per cent since 2006 and share of private sector jobs at 42 per cent, down from over half. We are sleepwalking towards a big corporate economy.

At the same time, insolvencies are at a record high. The Tax office, hot in pursuit of tax debt, reports that 46 per cent of small businesses aren’t making a profit. That’s why I’ve proposed 14 steps to energise enterprise. More incentives for those starting out, better access to justice when wronged and more emphasis on encouraging younger Australians to consider business ownership.

Let’s end the hidden tap-and go charges costing small business – and consumers - up to $1 billion. The big four banks still have to turn on the cheaper system for more than half their merchants. Small firms are too often left stranded by digital providers such as Facebook or Instagram.

Big tech needs real dispute resolution process (or a real person) to deal with disputes to avoid the run around of being told to log into your account to say you can’t after being hacked! How about a tax discount or offset for new small businesses to improve cash flow in the early ‘valley of death’ years? Nine out of 10 businesses who employ someone are small yet the rules are complex and onerous.

A dedicated small business fair work commissioner and rules could address this. Red tape grows in number and complexity. We need right-sized regulation and support that tells small business exactly what is expected. Cabinet submissions should include a small business impact statement so every time a decision is made, small business would be front of mind. Small business needs unfair business practices protections, solutions for the wicked challenge of insurance, a real opportunity to compete for government contracts and greater digital support and ease of access to get help.

The average business owner is now 50 and only 8 per cent are under the age of 30, half what it was in the 1970s. It is in our national interest to create a more supportive ecosystem to give enterprising people the best chance to be successful.

14 steps to stop small business's alarming downward spiral

Olivia Pearce — Fri, 09 Aug 2024 02:16:27 +0000

14 steps to stop small business's alarming downward spiral Olivia Pearce Fri, 08/09/2024 - 12:16

08 August 2024

Opinion piece by the Ombudsman Bruce Billson.

Originally published in the Canberra Times.

I fear we are sleepwalking into a "big corporate" economy.

Many small and family businesses are doing it tough right now and the post-COVID environment is, in many cases, even more difficult.

Small businesses are grappling with rising input costs, notably wages, fuel, gas, electricity, insurance and rent. And there continues to be ongoing shortages of talent and skills with lower rates of productivity putting upward pressure on labour costs.

The Tax Office has resumed its "lodge and pay" enforcement approach and those who had rent relief have found the landlord now wants to be paid. Then there is the whammy of 13 rises in interest rates by the Reserve Bank over the past two years still having an impact on the costs of financing and on customers' spending, preferences and confidence.

It's no surprise that corporate insolvencies have reached a record high and there's been a 50 per cent increase in calls to my office from small businesses worried a supplier might be insolvent or their own business might be heading that way.

There is also a growing number of increasingly complicated regulations such as a new definition of casual employment and provisions for converting to permanency; mandatory country-of-origin labelling for seafood in hospitality venues; and the prospective removal of the small-business exemption from the Privacy Act.

Together, it is taking a toll on time-poor and resource-constrained small business owners.

The ASBFEO �Թ�� Pulse, which is a "health check" of objective vital signs for the small business sector while also taking into account the "animal spirits" that drive decision making by the enterprising Australians, shows that post-COVID the business environment for small business is 25 per cent below the long-term average.

We need more incentives for those starting a small business, a simple, quick and cost-effective way for small business owners to settle court disputes, and more emphasis on encouraging younger Australians to consider business ownership.

After widespread consultation and investigation, my agency is outlining 14 steps designed to give more support to the nation's 2.5 million small businesses and calling on the parliament, policymakers and regulators to:

Explore the potential benefits of a tax discount/offset scheme for new small business owners to allow them to keep more of their income to re-invest in their business during the critical first three years.
Focus on right-sized regulation, including how regulators and government formulate and administer laws, to help, support and enable small business owners, who do not have the resources of big business, meet their obligations.
Require every cabinet submission, preliminary and formal regulatory impact statement and new policy proposal to include a small business impact statement.
Establish the Prime Minister's �Թ�� Awards to recognise and celebrate excellence and inspire the next generation.
Give small businesses an affordable, effective and timely alternative to defend their own economic interest where fair trading protections and reasonable commercial conduct safeguards are infringed upon by creating a Federal �Թ�� and Codes List in the Federal Circuit and Family Court of Australia.
Give small business a greater chance to compete for government contracts by decoding the rules and practices that favour the 'in-crowd' of familiar, established and larger suppliers.
Make it mandatory for banks and other providers to charge the lowest fee for tap-and-go, dual-network debit card transactions as the default, saving small business around $1 billion a year.
Undertake urgent and decisive action to ensure that essential insurances for small businesses are understandable, accessible and affordable.
Ban unfair trading/business practices that distort competition and harm small business.
Create a dedicated �Թ�� Commissioner and Division within the Fair Work Commission.
Require digital platform providers to implement clear, appropriate and standardised procedures for timely small business dispute resolution.
Honour businesses who fulfil their workplace obligations to employees, meet tax reporting and payment obligations in a timely way and pay small business suppliers in under 21 days, with a 'Good Business Pays' recognition and accreditation.
Expand digital learning and practical support through business system and reg-tech solutions, information management and practical Artificial Intelligence uses.
Develop a readily accessible and easily navigable central resource hub of actionable information, 'how to' guidance, programs and assistance developed by government and private sector specifically prepared for small business use.

There's more detail on our website asbfeo.gov.au

We need to create and nurture the spark that will inspire someone to turn an idea into investment, to build a business, to take on the risk and big responsibility of creating an opportunity-generating new enterprise, and to employ that extra person.

Small business is rightly celebrated for generating 33 per cent of our nation's gross domestic product and providing jobs for 42 per cent of the private workforce. But in 2006, small business contributed 40 per cent of GDP and employed 53 per cent of those with a private sector job. This is a worrying trajectory.

It is not enough to dedicate enormous time to just mitigating the wind in the face of our small and family businesses. These steps can provide greater support and some much needed wind in their sails.

Bruce Billson is Australian �Թ�� and Family Enterprise Ombudsman

Checking the pulse of small businesses across Australia

Olivia Pearce — Sun, 04 Aug 2024 23:32:58 +0000

Checking the pulse of small businesses across Australia Olivia Pearce Mon, 08/05/2024 - 09:32

05 August 2024

Opinion piece by the Ombudsman Bruce Billson.

Originally published in the Canberra Times.

Small business is the beating heart of our communities and our economy, so it is crucial to check the pulse of such an important sector to measure its health and vitality.

Whether we realise it or not, small businesses are a big part of our daily lives from the local café to the tradie or any one of the many personal services providers who improve our lives.

But it's a significant responsibility running your own business and the unseen 'business of running the business' can be physically, mentally and financially exhausting.

That's why I'm so pleased my agency, the Australian �Թ�� and Family Enterprise Ombudsman, has created the ASBFEO �Թ�� Pulse to measure and communicate a small business "health check".

The Pulse is an innovate combination of non-traditional and traditional data to produce an indicator of small business health. It's a check of objective vital signs for the small business sector while also taking into account the "animal spirits" that drive decision making by the enterprising Australians who look for delicious opportunities as they navigate challenges they may face.

The first release of the ASBFEO Pulse shows the business environment remains well below the long-term average - about 25 per cent down. Put another way, if you believe, as I do, small and family businesses are the "engine room of the economy", we have lost a cylinder in a four-cylinder engine in the aftermath of COVID.

Most recently, the Pulse fell 0.6 per cent in August 2024 and over the past 12 months it has fallen 3.5 per cent, pointing to a stabilising trend in a particularly challenging period. We will release a new Pulse check every three months.

What is clear from the Pulse is there continues to be a modest decline after the stark deterioration caused by an end of COVID support and COVID-amplified changes in the structure of the economy including inflationary pressures, skills shortages, supply chain challenges and pronounced margin squeeze, and the series of interest rate increases.

For small and family businesses, higher interest rates not only impact their costs of financing but have profound implications for customers in terms of their spending, preferences and confidence.

The time-series for the Pulse covers the past eight years and has been developed by my agency over the past two years and 'field tested' with small businesses.

We created the Pulse in line with OECD best practice. It brings together a range of data sources that can provide early indicators of changes in the lived experience of small business and the motivations that drive them and is particularly important when conditions are changing rapidly, which traditional sources of information and point-in-time surveys often miss. The Pulse captures three broad areas that reflect the eco-system for small business owners.

Sentiment: the human emotions and instincts that drive behaviour. This includes people considering starting a business, existing business owners considering closing their business and existing sentiment survey measures.
Business transformation: measuring variables such as queries about engaging staff, innovation, coaching and mentoring, marketing, advertising, capital investment and funding.
Business operation: The business of running a business such as complying with regulations, business entries and exits (including insolvencies), demand, economic performance, levels of debt and general economic conditions including disputes.

Our approach is different to other interesting and informative small business surveys that provide useful snapshots, since we use measurements beyond customer data, sample populations and specific questions. We are therefore able to capture the views and experiences of the business life-cycle, and in near-real time.

The Pulse probes factors which range from people considering starting a business, responses to changing conditions, those who are transforming or growing their business, through to those who are considering closing their business and those who finally do so. We're seeing rising queries from exhausted small business owners looking at their options. These include those who are in financial distress and those who are looking for a dignified dismount while they still have choices.

Small business owners are concerned about the viability of their business and whether they can ride out the tough economic climate. The value of debts owed by small businesses increased over the last year and around half of small business loans are secured by the family home.

Small businesses are increasingly concerned other businesses that owe them money are insolvent with corporate insolvencies at record highs. Unincorporated business failures have also increased, although they remain below pre-pandemic levels. Payment disputes are often an early warning sign of cash flow issues. These now account for 42 per cent of disputes where we provide one-to-one assistance to small businesses.

The labour market remains tight but has eased slightly over the past year. While this is encouraging for small businesses looking to hire staff, there are fewer smaller employers than last year. Queries about recruiting new staff have reached their lowest levels in nine months.

A bright note is queries from people considering taking the leap into business have remained relatively high since February and business formation continues. Similarly, there has been a rise in small business owners interested in growth ambitions and seeking business coaching and mentoring.

However, the operating environment remains challenging. Concerns about regulation continue to remain high, particularly tax and work health and safety. There are also increasing queries about small business privacy obligations.

Our Pulse check tells us we need to do more to energise enterprise. It is not enough to rely on the abundant optimism and drive of small and family business owners alone. We need the right incentives and better encouragement to do more than just mitigate the "wind in the face" but to confidently "put wind in the sails" of businesses and to make sure the "engine room" of the economy is firing on all cylinders and is supported by conditions that optimise the prospects for success.

Excessive insurance premiums are killing small businesses

Olivia Pearce — Thu, 01 Aug 2024 23:06:57 +0000

Excessive insurance premiums are killing small businesses Olivia Pearce Fri, 08/02/2024 - 09:06

04 March 2024

Originally published in the Canberra Times.

Finding adequate insurance cover at commercially viable terms is fast becoming a wicked challenge for small and family businesses.

There have been countless examples of small businesses closing down because they either can't get the insurance they need, or when it is available, they can't afford the prohibitively ridiculous premiums on offer, which in some cases have risen by 200 or 300 per cent.

Eye-watering excesses and a growing list of exclusions often accompany 'take it or leave it' insurance products that in some case undermine the business's ability to operate with any hope of being viable.

We saw this recently with a play centre that was told it would only get insurance at a very expensive price with behemoth excesses if it ditched its ninja obstacle course - its biggest earner. Despite having no claims, a well-developed risk management system, active supervision and monitoring and the help of an experienced broker, there was no insurer 'appetite' to cover this activity. The business was forced to close and the jobs, service to the community and resulting economic activity were lost.

Unlike households who - for many reasons - might choose to be uninsured or underinsured and have options about the level and nature of the risk protection policies they subscribe to, a small business must have insurance covering areas such as public liability.

If a small business isn't insured, it cannot engage in trade and commerce.

Live entertainment and music venues have been heavily affected by the lack of suitable insurance cover to continue what they have been doing for decades. While small professional services firms face skyrocketing insurance costs despite making no claims.

In sectors, such as amusement, leisure and recreation, the insurance crisis is so dire we were asked to look at an alternative model, known as a Discretionary Mutual Fund.

Our initial report called The Show Must Go On and subsequent further research and reports backed the creation of a DMF to prevent forced business closures, job losses and a reduction in activity that is important to livelihoods and communities, particularly in regional Australia.

Crucially, a DMF would be able to impose conditions of entry standards for members and enforce strong risk-management culture and procedures, reducing the likelihood of accidents.

Two years on, it is disappointing our major recommendations, including initial government support to set up a DMF, have not been embraced.

Over summer we've seen floods, storms and bushfires devastate some small businesses. The insurance sector can do more to be clear about what is and is not covered when a disaster hits a small business. Despite the reassuring advertising, complaints to regulators about claims being denied and a lack of responsiveness by insurers remain high.

We are already hearing complaints about insurance companies still holding up claims from terrible floods last year and a federal parliamentary inquiry is examining the response. Typically, these claims are mainly related to property, public liability and business interruption issues.

Two years ago, we conducted an inquiry into �Թ�� Natural Disaster Preparedness and Resilience which found insurers were uninterested in the steps individual small and family businesses take to mitigate disaster risk, or dismissive of them. It had zero impact on the availability and the pricing of their premiums as insurers say they look at risk across a community-wide or industry-wide basis.

It's frustrating many small, family and farming businesses are individually doing what's being asked of them but are seeing no upside to pricing premiums and availability and affordability of insurance cover.

With so many people now working from home, these home-based businesses need to check in with their insurer to make sure they are not on the wrong side of their cover.

Does their household insurance policy cover the two or three Harley Davidsons a business might be repairing in the home garage, if it caught on fire?

Is the business and customer protected if a patron slips on a wet floor and is injured at a home salon? And just how many assistants can you have in your home office helping with your digital media business or chooks producing eggs for roadside sale before your home base starts to not look like a 'household' by insurers?

This is all about important communication a business should have with their insurers and brokers, but it has to be both ways.

The insurance sector has explained the problem is a global one, described as a hardening of the market which means capital is scarce, reinsurance is difficult to obtain and risk appetites are low. In its 2022 annual report the Insurance Council of Australia indicated it would be a priority to address the availability and affordability of insurance.

More than a year ago, the regulator APRA urged the insurance industry to invest in "simplification across products, systems and processes".

For small businesses, insurance, while always vital business precondition, is no longer a once-a-year payment (with a likely inevitable modest price increase) that could be quickly sorted and the business owner could move on to the many other responsibilities of running a business.

It now requires active engagement, close attention to risks and their management, often data collection and collaboration with a specialist broker to navigate this 'hardened market' to source the cover that is needed, and a hefty uplift in cost even the Reserve Bank has called out as quite extraordinary.

And yet, still too many small businesses are not able to access and afford the insurance they need.

I'm pleading with the insurance sector to help small business by mapping out pathways to solutions to give small business the chance to stay in business. Urgent and decisive action is needed to ensure essential insurances for small businesses are understandable, accessible and affordable.

Small businesses can't be held to the same privacy standards

Olivia Pearce — Sun, 21 Jul 2024 23:48:45 +0000

Small businesses can't be held to the same privacy standards Olivia Pearce Mon, 07/22/2024 - 09:48

22 July 2024

Opinion piece by the Ombudsman Bruce Billson.

Originally published in the Canberra Times.

The public rightly expects any personal information collected and stored by businesses - whether they are large or small - will be protected and only used for the reasons it was provided.

It is not credible for small business to continue to have a blanket exemption from providing necessary and appropriate protection of the personal information they have about their customers, staff, and other businesses they are dealing with.

The digital world has added so much, creating new opportunities and risks and the responsibilities that accompany handling personal information need to evolve with the times.

That is why my office has been working with the Australian government to ensure what replaces the current small business privacy exemption and any new regulations, are right-sized and appropriate for small business, easy to implement with clear advice and timelines and will give confidence to customers.

While the exemption is no longer tenable, nor is it practical to directly apply legalistic privacy principles, which larger businesses have to work through, to a small business.

These are principles big business and government agencies need to decipher, interpret and apply to their circumstances, which most small or family businesses do not have the resources or staff to navigate and implement.

We welcomed the acknowledgement by Attorney-General Mark Dreyfus of the special circumstances and limited time and resources of small business, the need for support and a reasonable transition period and the need for an impact analysis of what changes would mean.

In the consultation sessions involving ASBFEO, we have worked hard with officials to help them appreciate that small businesses do not already have and will not soon have mastery of the Privacy Act. Nor will many be able to navigate data-handling protocols to develop a privacy statement and data-breach response plan. This understanding is critical to appreciate how small businesses operate and then appropriately design regulations to allow small businesses to be compliant.

Small businesses and their representatives are alarmed the system being contemplated would require a small business to interpret legalistic principles and undertake onerous and unfamiliar activities - exactly what small business consultation participants said was the worst way forward.

It is important now the consultation by officials focuses on readily understandable and practical steps supported by actionable information to ensure small businesses are not drowned in a sea of legal technicality and complexity.

A small business isn't a shrink-wrap version of a big corporation. There's no regulatory team or dedicated privacy experts, on-staff lawyers or sophisticated compliance systems. Typically, it's the owner - at 10pm - grappling with this after they've been running their business all day.

Small businesses will need clear guidance on the active steps they can take to protect the information of their customers, their staff, and themselves and to fulfil their responsibilities. This may include procedural templates, information guides and checklists explaining the clear steps required to meet their privacy obligations.

The government needs to translate privacy principles into clear, sequential actions, calibrated to the degree of privacy risk prevalent in the business that clearly responds to the question that will be asked by a small business: What is it I need to do?

Small business fears about new and unfamiliar compliance obligations would be eased by the government making a clear statement that it will provide concise, relevant and accessible guidance and there will be a suitable transition period.

Small businesses know they can suffer if customers lose confidence in their ability to protect personal information and will benefit from increased certainty around the way information is being managed and protected. There is a compelling business benefit in sound and dependable 'information management' in this digital era of opportunities and risks.

A cyber hack or malicious information release is harmful at many levels, including for the targeted small business that irreparably damages the business's ability to operate. The latest chilling report from the Australian Cyber Security Centre is that a cyberattack happens every six minutes and when a small business is hit, on average they suffer a financial loss of $46,000.

Sadly, in many cases it ends up being an enterprise-ending event as they never recover or re-earn the confidence of employees, customers, suppliers and partners.

Government should also embed any privacy changes in a nest of information management issues for small and family business including cyber protection, a safe digital presence, managing opportunities and risks presented by digital platforms, eInvoicing, data custodianship and consumer data right participation. Each is being pursued in a siloed way with different (often unknown) lead agencies, bespoke duties and concerns about mounting complexity and compounding compliance obligations.

These all can and should be addressed as an integrated 'information management' initiative highlighting both the business benefits as well as any new obligation through a synchronised engagement with small businesses through familiar intermediaries. This is an opportunity for government to progress important policy objectives while assisting small businesses to deepen their digital engagement, bolster vital information management tools and even explore the responsible use of generative artificial intelligence.

Why can't we explore what requirements can be systematised and routinely actioned by small business in existing 'natural business systems' and already familiar digital platforms and software being used for accounting and single-touch-payroll reporting? Rather than sprinkle resources around in the hope it better equips small business, why not work with the likes of MYOB, Xero, Intuit and Hnry (just to name a few) to embed key duties and action steps into the software businesses use daily?

More than nine out of 10 businesses are currently exempt from the privacy laws. Getting this reform right offers a golden opportunity to extend protection for customers, staff and suppliers. But it will not succeed unless the real-world circumstances and limitations of time-poor and resource-constrained small businesses are honestly understood and embraced by policymakers to create a workable, mutually beneficial and secure system for everyone.

Keeping small businesses afloat comes down to us all

Olivia Pearce — Sun, 23 Jun 2024 23:38:56 +0000

Keeping small businesses afloat comes down to us all Olivia Pearce Mon, 06/24/2024 - 09:38

24 June 2024

Originally published in the Canberra Times.

This week we celebrate World Micro, Small and Medium-sized Enterprises Day, which is a terrific opportunity to say a big thank you to the enterprising people who are the lifeblood of our communities.

We depend heavily on the small and family-run businesses in our lives - whether it is an electrician or builder, childcare operator, gardener, dog groomer, doctor or dentist.

It may be a bookkeeper or accountant, private tutor, cleaner or health therapy professional, a truck driver, fitness instructor or graphic designer.

Perhaps it is a local winemaker or farmer, mechanic, bespoke jewellery maker, pharmacist, grocer or cafe owner who work every day to delight customers and energise enterprise.

These are great people in plain sight,. We see them everywhere, every day.

Small business is a dynamic and fast-growing sector that allows people with an entrepreneurial spirit to pursue their dreams and own livelihoods. They come with varied ambitions, backgrounds and experiences but what they have in common is the desire to have a go.

MSME Day, on June 27, is an initiative of the United Nations General Assembly to raise public awareness of small business' contribution to our prosperity, wellbeing and community.

Almost 98 per cent of businesses in Australia are small businesses - some 2.5 million who generate almost $600 billion of economic activity, accounting for 33 per cent of our nation's GDP.

Small businesses provide jobs for 5.36 million people - 42 per cent of private sector jobs.

This contribution is truly worthy of recognition and celebration. But in 2006 the sector contributed 40 per cent of GDP and employed 53 per cent of private sector jobs.

This worrying trajectory shows we need to do more to energise enterprise.

Small business needs to be front of mind for our policymakers and regulators. We need to do all we can to shift the mindset from minimising headwinds to maximising the "wind in the sails" of our hard-working small and family businesses.

Why not establish the Prime Minister's �Թ�� Awards to celebrate excellence and inspire the next generation?

Every well-intentioned change by Parliament or regulators risks adding to the mountain of red tape that gets between the owner and the small business they are trying to run.

A simple improvement that governments at all levels around the country could take is to require every submission to Cabinet to include a small business impact statement. Regulatory impact assessments should start with and focus on small business implications, not consider this as an afterthought.

This would mean every time a decision is made, small business will be front of mind and bright on the radar screen.

Just released figures from the Tax Office show 46 per cent of small businesses didn't make a profit in the most recent year of accounts available.

And some three-quarters of self-employed business owners are earning less than the average total weekly, full-time earnings.

There's no rivers of gold for these people, just a hard slog.

Surely, we can do more to get the risk and reward balance right, ensuring small business and entrepreneurship is a really attractive option for people, then create a supportive ecosystem to give enterprising people the best chance to be successful.

Expectations and the "ask" take too little account of the cumulative demands and resource-constrained circumstances of small businesses.

There's a flurry of new workplace rules and obligations, changes to privacy laws, fear about cyber security and what we call 'white tape' where big business is asking for more and more information from small businesses suppliers.

Small and family businesses are not looking for an escape hatch, but need a right-sized, actionable, fit-for-purpose, and efficient approach with appropriate support and guidance.

Our small business owners are also getting older with the average age now 50, up from 29 where it was in 1976. In the 1980s there were twice as many small business owners aged between 30 and 49 as there were aged over 50.

And only 8 per cent of our small business owners are under the age of 30, half what it was in the 1970s.

Why is the next generation not seeing self-employment and their own enterprise as a pathway for the future? At a time when young people, particularly, look for purpose as well as profit in their lives, isn't self-employment a natural fit?

Encouragingly, 35 per cent of small businesses are owned by women - double the rate from the 1970s. Increasingly, new businesses are being created by women who are finding solutions to everyday problems, sharing their ideas and building a business from their ingenuity.

One in three small businesses are also run by people who were born overseas and our culture, local business communities, and the choice of goods and services available to consumers and other businesses, are enriched by their presence.

Taking on the responsibility of owning and running a small business can be inspired by a range of goals and motivations, an abundance of purpose and meaning and be rich with unpredictability of challenges, flexibility, self-agency and income.

The spirit that drives people to run a small business also makes them great advocates for and contributors to their community and they are more likely than the general population to be a volunteer.

For small and family business owners, their identities are interwoven into their business and the stakes are so much higher than just a job. Many people have invested a lifetime - and put their family home on the line - to build up their business, which amplifies the emotional challenges.

The pressures can feel unrelenting, but it is vitally important those running a small business look after their emotional wellbeing and mental health.

Sometimes it can be as simple as making time to pause, reflect and reconnect. Talking to trusted advisers and networks is a great way to find solutions. Our website asbfeo.gov.au also has tools and resources that can be useful.

The best way to support small businesses is to be a kindly customer - patient and understanding, with good and generous intent. Small businesses are run by real people who deserve our respect and empathy every day.

Our small and family business owners and managers are great people, and we salute the terrific contribution they make everywhere, every day.

Government should show small businesses respect

Olivia Pearce — Mon, 10 Jun 2024 23:12:39 +0000

Government should show small businesses respect Olivia Pearce Tue, 06/11/2024 - 09:12

10 June 2024

Originally published in the Canberra Times.

Australia's small businesses have been treated in a very shabby way by squabbling in our Federal Parliament.

And our Parliament is a repeat offender.

Repeatedly we hear it said that small business is the engine room of the economy yet that engine is being forced to operate below capacity. And small and family businesses with the means and capacity to play a part of the energy transition have been dudded.

Thirteen months ago, the Australian government announced a new �Թ�� Energy Incentive to give a tax break worth up to $20,000 to support electrification and more efficient use of energy.

This bonus 20 per cent depreciation was available for those with a turnover below $50 million and promoted as helping them to save money on energy bills by electrifying their heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.

The government boasted the $314 million scheme had been "specially timed" to help small businesses lay the foundations for their future growth.

Now the clock is running out. The scheme requires a small business to have the assets or upgrades not only purchased but installed and "ready for use" by June 30.

However, the legislation that would make this tax break law has still not been passed by the Parliament and is caught in a battle between the parties about other legislation.

It is fine for opposition parties to seek to change government legislation and it is equally fine for the government to say no.

But it is not fine for this squabbling to run down the clock so there is no realistic prospect a small business can have certainty to provision for and spend this money with confidence the tax deduction is real.

We're talking about a small or family business spending $100,000 to get the full value of this tax incentive. That's a big commitment, and as recognised by the government, the tax break may be the critical difference in being able to afford to do this.

As it currently stands, the package of bills has passed the House of Representatives but been changed by the Senate. The government rejected those changes and sent it back to the Senate, which stood its ground. As did the House.

So, this stalemate goes back to the Senate, but it does not sit again until June 24. Even if this is the first item of business and the Senate changes its mind, it will leave small business with less than a week to buy, install and use this equipment. That's if it's even available.

It's just not realistic and it's an insult to small businesses.

We're hearing from confused small businesses who just want certainty. Until it passes Parliament, they cannot know what the final law will say and if an intended investment is eligible.

Leading accountants say it is difficult for tax agents to advise clients about the �Թ�� Energy Incentive and until it becomes law, the Tax Office can't provide guidance to understand the types of investments that qualify for the incentive.

Small businesses need time to plan investment decisions, not be forced in the final weeks of the financial year when they have so many other deadlines to meet, to rush such big spending decisions.

Frustratingly, this is not the first time this has happened.

The $1 billion technology investment boost, announced in the March 2022 budget was not made law until 15 months later on June 23, 2023, and then expired a week later on June 30, 2023.

It offered businesses with an annual turnover of less than $50 million a bonus 20 per cent deduction for investing in digital operations such as new equipment like technology, cloud-computing, eInvoicing or cyber security.

We don't know how much of the proposed $1 billion in tax breaks were actually used.

Then there's the perennial uncertainty about the Instant Asset Write-Off Measure, that is again held up in Parliament.

It has become the practiced for the eligible amount and the qualifying threshold to be adjusted by governments from year to year, and during the pandemic this was generous to help business confidence.

However, for the soon-to-be-completed 2023-24 financial year, the amount announced last year of $20,000 per asset basis for eligible small businesses with a turnover up to $10 million, has not yet become law.

It may not be settled until a week before the end of the financial year. If there's no agreement by the Parliament, the rate will only be $1000 - so that's a big risk for a small business to take.

This highlights the need for predictability and certainty so a small business can plan in a sure-footed way for important investments that uplift the capacity, the productivity and drive innovation in their business.

Laws with a time deadline must come with a minimum implementation period. We would suggest no less than six months from Royal Assent until the time a scheme ends.

Such incentives help energise enterprise. That's why they are announced in the first place.

We need to give more encouragement for people to turn an idea into an investment and to make that big decision to turn scarce resources into new capability, new equipment, new technology to help with the success of that enterprise and the livelihoods that depend upon it.

Small businesses need to be able to trust Parliament to give them enough time to understand changes and with certainty factor them into their planning.

Most of all, small and family businesses need to be treated with respect.

Too many small businesses are hurt by not being in the 'in-crowd'

Emily Carter — Thu, 30 May 2024 01:54:10 +0000

Too many small businesses are hurt by not being in the 'in-crowd' Emily Carter Thu, 05/30/2024 - 11:54

27 May 2024

Originally published in the Canberra Times on Monday, 27 May 2024.

Bruce Billson

Winning a government contract can be life-changing for a small business. As all businesses know, there is no substitute for good customers.

The Australian government procured goods and services worth $75 billion in 2022-23. Despite making up 97 per cent of all businesses, small business suppliers accounted for only $8 billion, or 11 per cent, by value.

My agency was asked by successive Coalition and Labor governments to independently examine how procurement rules and processes are working for existing and potential small business suppliers and what improvement could be made.

We were encouraged to be bold and bring fresh thinking to this long-standing area of contention and frustration for small business because actions already taken have not shifted the dial.

The overwhelming response from our consultations with Australia's small business community was that too many feel excluded from the chance to tender for government contracts because they are not part of the "in-crowd".

Repeatedly, small suppliers told us the existing system is just not working as the process involved in bidding is too complicated, not conducive to competition, opaque, inefficient and incongruent with private-sector processes.

If you run a small business that hasn't previously been a supplier to the government, this is a bewildering space. It is really hard to understand how to get involved.

And even rules designed to boost opportunities for First Nations enterprises and small businesses are tricky for procuring officials to navigate.

As part of our inquiry, a survey of government officials (who undertake procurements as needed) found many were frustrated by the increasing complexity of procurement priorities and connected policies and difficulty identifying SMEs was a common barrier to them being selected.

Analysis by the e61 Institute agreed, showing Commonwealth procurement has increasingly favoured large and existing suppliers since 2014.

What we need is real engagement and commitment to improving procurement outcomes, with support for officials and consistent monitoring of what actually occurs.

We consulted extensively with government departments and agencies throughout the inquiry and in developing 11 specific, constructive and practical recommendations in our report handed to the government last December.

These included targeted steps to:

Remove complications in procurement;
Maximise opportunities for small businesses to compete;
Enable impartial, timely and consequential reviews of decisions;
Build the confidence of officials through increasing competence and improved support; and
Consistently measure outcomes to achieve policy objectives.

Earlier this month our report was publicly released with a response by the Australian government that was quite frankly disappointing and at odds with the evidence, research and clear view of those who made submissions about their direct experience trying to navigate the existing system.

It was a missed opportunity to meaningfully improve the ability for competitive small and family businesses to be a supplier to the Commonwealth.

I was surprised several of the substantive recommendations and proposed reforms that have not been embraced, were rejected without any discussion at all.

The sentiment that it is "all sorted" or more of the same with a minor tweak here and there, was not reflected in any of the submissions, research or reference group input.

More of the same is not going to bring about the change in confidence prospective small business suppliers are looking for to engage in a complicated, costly and time-consuming process.

Dismissing considered and evidence-based reforms as potentially expensive, inefficient or duplicative without any meaningful examination to justify retaining current and known-to-be ineffective and perfunctory arrangements, is at odds with the stated ambition of successive governments to improve Commonwealth procurement for small business suppliers.

Our package would repurpose existing funding and resources - not duplicate it - to produce an efficient and easy-to-navigate procurement framework that would make a significant difference.

For the recommendations where the response "agrees" or "agrees in part" we are happy to continue to engage constructively and collaboratively so that some urgent improvements can be made for small suppliers.

It is encouraging the government concurs with our recommendations to better support procurement officials and advance women's entrepreneurship.

The recommendations which the government has not fully embraced or will consider further, provide new thinking and approaches, based on what is working elsewhere that can help genuinely shift the dial to better realise the government's goals.

We recommended abolishing the procurement coordinator function and replacing it with a procurement commissioner, who would have independent processes for resolving complaints and the ability to synchronise and support procurements.

Why wouldn't you create a commissioner like occurs in so many other policy areas with focus, authority, drive and independence? The current procurement coordinator's complaints function is neither timely nor consequential, with the coordinator having no authority to compel an outcome. Only three complaints a year on average have been lodged since 2011 and the results of these complaints are not transparent. During our inquiry, no small business supplier was prepared to go on record for fear of retribution.

Let's be clear. A small business is not looking for a belated, legal victory through a judicial review. That brings no comfort. They want a fair opportunity to compete to be the supplier.

Our report also outlined recommendations to improve defence procurement, make AusTender fit for purpose, support procuring officials to identify and use small businesses, reform government panels, boost women-owned business opportunities and improve payment times.

We found active stewardship is essential to ensuring the Australian government operates as a model customer, secures better value for money for taxpayers, and achieves its ambition to provide more opportunities for Australian small businesses and First Nations businesses.

Introducing "retained economic value" as the evaluation framework where "price" alone can undermine Future Made in Australia objectives, is a crucial recommendation too important to dismiss.

In fact, employing a retained economic benefit approach would be a game-changer driving "Buy Australian" ambitions and allow the government to quantify (without prescribing) the contributions of procurements, in terms of value of expenditure on goods and services supplied by domestic firms, labour provided by residents and First Nations Australians, and investment in capital and social infrastructure.

We will continue to encourage the Parliament and the community to see the merit in our recommendations and adopt them to benefit small business, the taxpayer and the Commonwealth alike.

The report and recommendations are available at: asbfeo.gov.au/procurement.

Bruce Billson is the Australian �Թ�� and Family Enterprise Ombudsman.