Business confidence is in the bottom 5% on record. How SMEs can protect cash flow now

For small and medium businesses, the practical question is how to protect cash flow and keep options open while conditions are tough. This article explains what the latest surveys show and what business owners can do now.

What the NAB survey shows

NAB's September survey found business confidence fell 4 points to -13, its third consecutive monthly decline. That's 18 points below the long-run average and among the weakest 5% of readings in the survey's history.

NAB described a "triple squeeze" of higher interest rates, global uncertainty and high fuel and diesel costs weighing on confidence.

Business conditions held at -1. Small improvements in trading conditions and profitability were offset by a 3-point fall in employment, which is now at its lowest level in five years.

NAB says the unusual mix of weak confidence, persistent cost pressures, above-average capacity use and softer profits could point to a further slowdown in economic activity in the final quarter of 2026.

The September quarter survey showed the same strain on margins. NAB Chief Economist Sally Auld said sales margins fell a further 4 points to -20, their lowest level since June 2020, and margin pressure is now the second biggest issue affecting confidence.

Consumers are under pressure too

Business confidence reflects what's happening to customers. The Westpac–Melbourne Institute Consumer Sentiment Index fell 4.7% to 80.4 in October, one of the forty weakest readings since the survey began in the early 1970s.

More than 80% of consumers expect mortgage rates to rise over the next year. For businesses that depend on household spending, such as retail, hospitality and trades, that means demand is likely to stay cautious.

Will the RBA raise rates again?

The RBA's next meeting is on 3 November, Melbourne Cup Day, and economists are divided.

• Case for a rise: some economists say that if cost pressures keep building, the RBA may have little choice but to raise rates again on Melbourne Cup Day.
• Case for a hold: Bendigo Bank expects the cash rate to stay at 4.60% through November and December, unless upcoming jobs or inflation data deliver major surprises. CommBank also expects the RBA to hold for the rest of the year, though it says a November rise remains possible.

The safest approach for businesses is to plan for the possibility of higher rates, not to bet on a hold.

Six steps to protect cash flow now

1. Forecast 13 weeks ahead

A rolling cash flow forecast shows pressure points before they arrive. Include tax obligations, loan repayments, payroll, supplier terms and seasonal changes in revenue.

2. Stress-test your borrowing costs

Work out what an extra 0.25% or 0.50% on variable-rate debt would mean for monthly cash flow. If the answer is uncomfortable, act now rather than after the next rate decision.

3. Protect your margins

With margins at multi-year lows, review pricing, supplier contracts and fuel-related costs. Small changes to pricing and payment terms can make a meaningful difference.

4. Collect money faster

Tighten payment terms, follow up overdue invoices promptly and consider deposits or progress payments where your industry allows. In a slowdown, slow-paying customers are a major cash flow risk.

5. Keep on top of tax

Tax debts can build quickly when cash flow is tight. The ATO will keep accepting credit card payments until 30 June 2027 after the government delayed its planned ban, but businesses should still set aside GST and PAYG as they collect it. Talk to your accountant early if a shortfall is coming. See ATO credit card ban delayed to June 2027.

6. Arrange funding before you need it

Lenders assess businesses more favourably when they're applying from a position of stability rather than urgency. If you may need working capital, refinancing or equity release in the next six to twelve months, start the conversation now.

Using property to support the business

Many SME owners hold property, either commercial premises or residential property, that can support business funding. Options can include:

• refinancing existing debt to improve cash flow or consolidate several facilities
• releasing equity for working capital, stock or equipment
• short-term or bridging finance to cover a timing gap, such as waiting for a sale, a large receivable or a refinance to settle
• second mortgages where the existing first mortgage should stay in place.

Each option carries risk. Property-secured lending puts the property on the line, so it suits businesses with sufficient equity and a clear plan to repay. See First mortgage vs second mortgage: how lenders actually assess your security.

What brokers can do

For SME clients, this is a good time for a proactive review. Brokers can:

• identify clients with variable-rate debt, upcoming expiries or tight serviceability
• raise funding options before a crisis, not during one
• help clients prepare clear financials and forecasts, which speed up approvals in any market.

The Funding Door view

Tough conditions are when good planning pays off. Businesses that forecast cash flow, protect margins and arrange funding before they need it are far better placed to get through a slowdown than those who wait for pressure to build.