What are the big trends affecting Aussie small businesses in 2023 and beyond? Part 1

In this two-part episode of talkBIG, hosts Andrew, Young and Chris explore the big trends affecting small businesses in Australia in 2023 and beyond. If you own a small business, listen up because this episode is just for you. 

The world is changing fast, so it’s important for business leaders to reflect on their strategies and look for ways to improve. Obviously, knowing what to expect makes it that much easier to plan ahead. Earlier this year, RSM released an in-depth report which identified 8 trends changing the Australian business world in 2023. Our talkBIG panel discuss the report, talking about each trend and what it means for the average Aussie small business owner.  

In part one of this two-part series, the gang talks about some pretty important topics that could make or break your business. First up, they cover wage compliance and how to stay on the right side of the law when it comes to paying your employees. Trust us, you don't want to get caught out on this one!

Then, they delve into data privacy, discussing the hefty price tag that comes with collecting customer data. With data breaches on the rise and the government cracking down on privacy breaches, it's important to take data privacy seriously. Luckily, the guys have some tips on how to do just that.

Next up, they tackle the topic of digital business and how to give your business a digital makeover. With remote working becoming the norm, it's time to start thinking about how you can use technology to improve your business and save money.

Last but not least, they chat about data insights and how to use the data you collect to make smarter business decisions. By combining data from different sources and incorporating external data, you can gain valuable insights that will help you make informed decisions for your business.

Stay tuned for part two, where we cover the remaining four trends impacting small businesses in Australia.

Thanks for listening! Visit the RSM Australia website to ask the hosts a question.

Transcript

00:00:01:04 - 00:00:14:13

V/O

Welcome to the RSM talkBIG podcast. Helping you invest well, understand money, and achieve the best tax outcomes. Your hosts today are Andrew Sykes, Chris Oates and Young Han.     

00:00:18:11 - 00:00:42:15

Andrew Sykes

Hey everybody, and welcome to the RSM talkBIG podcast. This is our podcast where we talk to you about how to save, invest and protect your wealth. So we'll unpack a few ideas and welcome to the New Year. I'm joined by our regular hosts, Young Han and Chris Oates. Welcome guys. And how was the break?

00:00:43:03 - 00:00:49:24

Chris Oates

Yeah, wasn’t it good to get that little bit of time off? I think everybody enjoyed it. Everybody deserved it. 2022 was a tough year.

00:00:50:19 - 00:00:55:14

Andrew Sykes

It was a big year for us. And what do you think businesses are talking about in the New Year, Young?

00:00:56:01 - 00:01:20:00

Young Han

Well, with the interest rate's just going up and everyone's just thinking that 2023 is going to be really difficult. But at the same time since we’ve come out of the unusual COVID conditions, there are more people that are saying that “my business is actually booming.” So, it really depends on what industry you are in and whether you have planned for bad days or not.

00:01:20:04 - 00:01:51:02

Andrew Sykes

Yeah, and we will say that this year brings new challenges and opportunities for small business. The team at RSM have gotten together and produced a report on those trends. Our thinkBIG report has information about eight trends affecting small businesses in 2023 and they're looking at how fast the world is changing, what's important for business leaders to reflect on, business strategy and what we think is going to change.

00:01:51:02 - 00:01:58:17

Andrew Sykes

I reckon today we just have a chat through those trends and we talk about how they're going to impact on small business.

00:01:58:17 - 00:02:10:01

Young Han

That's nice. And I think if you know what's happening with the changes and trends for this year, it no longer becomes a challenge. It’s going to be an opportunity for you.

00:02:10:07 - 00:02:40:09

Andrew Sykes

Yeah, and we think - our team reckons that the eight big trends are going to be: Wage compliance. What's happening in that space has been really big in the in the news and this is about paying employees right, getting it right. Data privacy. We saw that blew up at the end of last year, that's going to continue the digital wave. And digital business, how that’s changing. Tie that in with a bit of data analysis is trend number four and I think we’ll cover those off in this episode.

00:02:40:09 - 00:03:08:19

Andrew Sykes

But in our next episode we want to also then talk about cyber security, the continued impact of staff shortages and the challenges of attracting and retaining staff. Talking about cash flow; very relevant with your comment on interest rates, Young. And virtual CFO. How we can start to use some of those trends and flow them into getting a virtual CFO and what we see happening with those.

00:03:09:04 - 00:03:15:07

Andrew Sykes

So, I reckon let's break it down a little bit. Wage compliance. Chris, what are you seeing there, mate?

–             Wage compliance: How to make sure your business stays compliant with wage and salary awards.

00:03:15:07 - 00:03:34:19

Chris Oates

I think the wage compliance, is becoming more digital and it's so much easier for it to be tracked to make sure wages are being paid, staff are getting what they should be as well as staff receiving the correct superannuation contributions. So, it's really important now that businesses are on top of it.

00:03:35:07 - 00:04:00:04

Young Han

And everyone probably knows and have heard of single touch payroll. They are seeing that the second pays are rolling out. So what happens is, the ATO is going to get all the information as to what kind of wages you paid, the leave tracking and everything else so that it becomes more transparent for the employee as well as the employer and the ATO.

00:04:00:04 - 00:04:14:10

Young Han

The other thing is that, depending on what which industry you are in, your awards are going to be changed again. So you have to make sure that each 1st of July, that's usually when it changes, to make sure that you're paying your employees right.

00:04:14:16 - 00:04:35:23

Andrew Sykes

Yeah, and it's a good point. Single touch payroll sort of crept up on a lot of business owners and they didn't understand the implications. But if you look back on it, if we went back a few years ago, you would report your obligations by an employee once a year, you just do your reconciliation. Now it's every pay run, isn't it?

00:04:35:23 - 00:05:11:16

Young Han

That's correct. And then also it's relevant to your closely held employees. In other words, your family members. A lot of businesses used to do their yearly return. So, deciding how much wages we want to pay to my family members, is no longer possible. You're going to have to have them on the books and you have to include them in their regular pay run so that even that the money paid to your family members or yourself as a working director, it's still included and treated fairly as if it was the business paying a third party.

00:05:11:22 - 00:05:36:12

Chris Oates

And that's what we've seen. From the financial planning perspective, talking to people about their superannuation, if you sometimes work for a small business, if the cashflow isn’t there, if it's cyclical income that you might not get your super contributions until a bit later in the year. But single touch payroll changes that. You can now see that regular payment coming in so people are getting their retirement, all their retirement money as they should.

00:05:37:03 - 00:05:52:02

Chris Oates

I think if you own your own business and you've been an employee, as you said Young, your super was always the last to get paid. But now it's making sure that people are still in your own business, but still make that compulsory saving.

00:05:52:05 - 00:05:58:14

Young Han

And talking about that super guarantee as well. It's a big change. So, what's the rate for the ‘23 financial year now?

00:05:58:14 - 00:06:06:21

Chris Oates

We're at ten and a half per cent. So, what your gross income is, if it's 50,000, if it's 100,000, it's ten and a half per cent.

00:06:07:03 - 00:06:28:17

Young Han

And also, it's important to check what your contract actually says, because a lot of employers – not intentionally - sometimes do not pay their employees properly. It’s been changed. And what's the implication? It needs to be happening in your system because sometimes people think that well, it is just taking up more into super.

00:06:28:17 - 00:06:37:00

Young Han

It depends on how your contract is drafted. It might just say that it's an extra cost to your business that you have to pay on top of your salary.

00:06:37:00 - 00:07:02:14

Andrew Sykes

That's very right. And when we talk wage compliance, that's what we really mean is understanding what you should be paying your employees for the time that they work for you, including all the allowances, the superannuation and long service leave, annual leave, personal leave, all the entitlements under the modern Fair Work Act, under their awards, under any individual contracts.

00:07:03:10 - 00:07:23:23

Andrew Sykes

There is so much information available now and employees themselves take more care to understand what their super is, what they're entitled to, what their award should be. So, you have a much more informed employee base, so you've got to get it right. So, what happens, Chris, if we don't get it right?

00:07:24:21 - 00:07:38:11

Chris Oates

Well, the ATO, as I said, can track it down and administer penalties. So that'll be the directors of the business - the business owners are the ones liable for it.

00:07:38:14 - 00:08:10:14

Young Han

That's right. And we've seen some businesses become insolvent because they couldn't pay for those obligations. So, what I mean by obligation is their super guarantee and the PAYG summary. So, you're supposed to withhold that money and put it aside so that when you lodge your business activity statement every quarter or monthly, you are supposed to pay that to the ATO. But some of the businesses just didn't put that money aside and they didn't pay at the end.

00:08:10:14 - 00:08:14:24

Young Han

Some of the businesses couldn't pay back and they become insolvent.

00:08:15:08 - 00:08:37:09

Andrew Sykes

Nowadays, liabilities can become personal liabilities of the directors. And I think if we have a look at it, one of the key things is not just the regulatory part, it's the impact on your business. And we've seen businesses shamed publicly and they're being accused of wage theft. It's gone beyond just cutting a few corners to now it's viewed as wage theft.

00:08:37:09 - 00:08:58:02

Andrew Sykes

A really important area. And in terms of trends, we are going to see increased compliance from the ATO and we're going to see increased scrutiny from employees themselves coming back and saying, hey, you're not paying me right, and you need to fix that. That has a real impact on modern business. We have the systems and processes available there and get things right.

00:08:58:06 - 00:09:01:05

Andrew Sykes

As business owners, we need to make sure they're right, don't we?

00:09:01:11 - 00:09:02:03

Young Han

That's correct.

Data Privacy: The hefty price tag attached to your business’s customer data collection

00:09:03:12 - 00:09:14:14

Andrew Sykes

Okay. So, trend number two data privacy, data really blew up at the end of last year as there were various scandals.

00:09:14:14 - 00:09:41:03

Young Han

Yes. Data breach is serious. And it occurs in many organisations. Last year it was Optus and Medibank. They had data breaches and a lot of confidential info, individual personal information was leaked and the impact of that was quite significant. And there's a significant penalty as well. Chris, have you heard about the penalty price we are looking at in 2023?

00:09:41:14 - 00:10:03:18

Chris Oates

The penalty has changed, and it's increased massively. It used to be about $2.2 million maximum penalty. But if it can be repeated. Now offences can now be $50 million and that's the minimum. It could be $50 million, or it could be three times what the burden is on people.

00:10:03:24 - 00:10:06:17

Chris Oates

Or if you can't work it out, it could be up to 30% of your turnover.

00:10:07:03 - 00:10:32:04

Andrew Sykes

These are really big penalties. And I understand we've been advised that government’s conducting a review of the Privacy Act, which is likely to result in even stronger mandates around that collection of only necessary data and keep it around only as long as necessary. As well as having penalties now, the actual burden of keeping data is going to get a lot more expensive, isn't it?

00:10:32:04 - 00:10:40:00

Andrew Sykes

Are businesses going to have to be more careful about how we store it and if we get it wrong, I mean, 30% of your turnover is a big amount.

00:10:40:09 - 00:10:50:23

Chris Oates

Oh, definitely. It can be more than your profit. That can definitely wipe you out for a year or couple of years, depending on what your business is and how you're traveling.

00:10:51:06 - 00:10:53:21

Andrew Sykes

Yeah. So, who's responsible for the data breach?

00:10:54:06 - 00:11:06:18

Young Han

Well, business owners are, even though and even if you're using another agency to collect data on your behalf, it's still going to be the data that you use and that you collected.

00:11:06:21 - 00:11:13:09

Andrew Sykes

So, if it's my customer and I go and pay someone to look after the data, I'm still responsible? I can still get fined.

00:11:13:11 - 00:11:14:19

Young Han

Yes, that's correct.

00:11:15:08 - 00:11:35:07

Andrew Sykes

Yeah. So be careful. There's a lesson - be careful of who you use to store your data. And that's going to be one of the key trends, isn't it? Is having a look at it how we actually curate this data. I think personally, if I was a small business owner that had data, I'd want to not keep it.

00:11:35:21 - 00:11:40:12

Andrew Sykes

If I could, I'd want to use it and then destroy it.

00:11:40:12 - 00:11:47:22

Chris Oates

But takeaway is the risk to the business. If you don’t have the data, there’s no risk.

00:11:48:06 - 00:12:08:16

Young Han

And that's why we're saying that just collect the data that you need and then once you used it, you need to safely destroy that and also, if you are going to be keep it on your database for whatever the reason, maybe because of the marketing purposes, then you need to have the right info system to secure it.

00:12:09:03 - 00:12:27:21

Andrew Sykes

Doesn't that tie in with the wage compliance as well? If we're looking at underlying trends on both of those, the government's out there with a big stick for getting it wrong and there's fines and penalties, but probably the bigger damage is the damage to your reputation.

00:12:28:17 - 00:12:49:01

Chris Oates

Well, you look at Optus, everybody still talks about it. Same with Medibank. The big businesses are the ones that are in the news. But if you're a local small business and people know you, you might know Joe Bloggs down the street, he'll know somebody else, she'll know somebody else. All of a sudden, you're the person that's leaked everybody's data and nobody wants to deal with you.

00:12:49:01 - 00:12:52:05

Andrew Sykes

And they talk about it. So, this is not just a big business problem, is it?

00:12:52:16 - 00:13:14:09

Young Han

No longer a big business problem and it's not something that... You must consider it, because it could become a big problem. And the statistics says that. More than 60% won't survive from such an incident because of those impacts on your business.

00:13:14:12 - 00:13:22:20

Andrew Sykes

So, hang on. So, you're saying that more than one in two businesses are going out of business when they have a data breach?

00:13:22:20 - 00:13:29:01

Young Han

Yeah, they just don't have the capacity or the resources to recover from the damage.

00:13:29:01 - 00:13:49:15

Andrew Sykes

Okay. Well, wow, that's I think we're all a bit speechless at that. That's a lot of damage. So, it's worthwhile getting in front of this business and just getting a data specialist to review where you're at. And it doesn't matter the size of the business. So, conducting that comprehensive review and trying to determine where the leaks are.

00:13:50:07 - 00:13:59:13

Andrew Sykes

Yeah, like other things we do in business, we go and get insurance, we make sure of our work, health and safety. This is just another area we need to manage in business.

00:13:59:13 - 00:14:24:18

Young Han

And more importantly, when we are talking about data privacy, we only talk about the actual security. But it's also what the people involved in the business and how we actually educate them is really important. For example, I work with a lot of doctors within the medical practice, sometimes a patient calls and then they want to confirm their name, date of birth and address.

00:14:24:18 - 00:14:31:22

Young Han

And then if he repeated over the phone in front of everybody else in the waiting room, that is a privacy breach.

00:14:32:04 - 00:14:55:01

Andrew Sykes

Yes, I tell you, treating the data when you've got it. And I rang up a company the other day and I had to pay with my credit card and the lady was really good on the other end. And she said, just hang on, we've got an automated service. And she didn't take my credit card details. I typed it in on my phone into their system and they didn't even store them.

00:14:55:18 - 00:15:00:08

Andrew Sykes

So, they took the payment, did it over the phone, typed in, and they don't keep the data.

00:15:00:12 - 00:15:02:20

Young Han

Tell you what, that company knows what they're doing.

00:15:02:20 - 00:15:17:09

Andrew Sykes

Yeah, and I was pretty impressed with that. I think this is a trend that’s going to impact on businesses. When companies ask me now for date of birth address etc - what do you need that for exactly?

00:15:17:09 - 00:15:17:17

Young Han

Yes.

00:15:17:24 - 00:15:38:17

Andrew Sykes

So, dealing with your customers and I think being conscious and upfront with your customers and having a strategy, you can add to your business and your reputation. So it's not only the fear of getting it right it may also be the fear of getting it wrong.

00:15:38:17 - 00:15:46:17

Chris Oates

Right and people will talk about it. If you use your experience, and you're saying, yep, I've had these positive experiences, they were great. People will go there.

00:15:46:19 - 00:15:52:17

Young Han

Again, if they know the issues to be addressed. And if you’ve got the right actions in place, it's an opportunity for you.

Digital Business:How to give your business a digital makeover

00:15:52:21 - 00:16:18:17

Andrew Sykes

Yeah, and just a reminder to everyone listening, you can get more information on these trends by reading our report. Head to the RSM website rsm.com.au. Have a look there under talkBIG and it's our Top Trends for 2023 report which we have just released. The third trend we wanted to have a bit of a talk about was digital business.

00:16:18:17 - 00:16:23:23

Andrew Sykes

We've been talking about this for years. Is there still momentum? Are we still seeing it being a top trend?

–             Digital Business

00:16:23:23 - 00:16:31:13

Young Han

Well, isn't it a part of our life now? I don't think there are many businesses left that don’t have an online shop now.

00:16:31:24 - 00:16:40:06

Andrew Sykes

Not only online shopping marketplaces. By the end of 2022, most businesses had some form of remote working in place.

00:16:40:12 - 00:16:57:06

Chris Oates

Well, I was reading articles the other day that businesses that don't even have offices anymore because people can just work from home. They can travel to see clients or who they need to. So that's been, well, since COVID came in. There was a lot of businesses that were probably a bit slow to the mark that had to make the move.

00:16:57:14 - 00:17:00:06

Chris Oates

It’s changed the world and how people operate.

00:17:00:12 - 00:17:24:01

Andrew Sykes

And that's probably the trend for 2023, isn't it. We've now implemented this work from home and changed work practices. It's potentially now, how do we reduce our costs? So maybe we don't maintainfull offices for allour workers. Maybe we say, well, let's get rid of some space, let's look at ways that we can actually maximise the benefits.

00:17:24:02 - 00:17:25:23

Andrew Sykes

Yeah, now that has become the norm.

00:17:26:04 - 00:18:09:13

Young Han

Yeah. And also, I guess the digital business started with the business customer relationship moving online. 

COVID has altered the traditional relationship of “within the business how people operate and how they interact and that is now becoming digital. So if you’re looking at the whole cycle or the supply chain to the customer… it’s becoming all entire process becoming online and which means that, it just everything ties in together. Your data privacy, your cyber security, how things are working, how payments are made, automation, digital payment and everything else just, just folds in part.

00:18:09:22 - 00:18:34:04

Andrew Sykes

Yeah. And I mean, we're accountants. Well, Chris is not, he is a financial planner, but yeah, you and I are accountants. And what accountants love to do, we like to save money. I think this is the year where businesses can start working on integrated systems. Before, we were quite happy to access an application and you would go in and log in and close that down and go and access another one.

00:18:34:05 - 00:18:40:09

Young Han

Like a different style. Having five or six different apps running. Yeah, but they don’t talk to each other.

00:18:40:09 - 00:19:01:21

Andrew Sykes

And now I think it's, it's a year for things like single sign on where you just sign in. Once you access everything, all your systems integrate and talk to each other, and you start saving and reducing costs by having integrated systems. So maybe some of the promises technology's been making about eliminating unnecessary costs.

00:19:02:24 - 00:19:03:05

Andrew Sykes

And boosting efficiency, minimising human error. Maybe this is the year we're going to start seeing that as a strong trend.

00:19:08:16 - 00:19:24:08

Young Han

A huge trend is becoming paperless. The whole process when you're talking about account payable and receivable, there's no more of the sent invoice printed out scanning in and someone approve it and get that in. And then make someone pay me.

00:19:24:13 - 00:19:43:15

Andrew Sykes

But that's where you need your digital advisor to come in and say, hey, I can get that bit of software or that process to talk to the other process so we can have a single entry. So, we're not entering multiple data, we're not using spreadsheets to reconcile. Everything's just flowing through.

00:19:43:15 - 00:20:10:14

Young Han

That's right. And then I think it's the biggest thing that you need to remember about the digital business. It's not about the actual system. It’s change management of people’s behaviour. That's why you want to engage a professional to actually look at your process and then implement the right tools, because there are so many apps and tools available to address the issue that you want to address.

00:20:10:19 - 00:20:21:11

Young Han

But it really depends on what your business is about, what's the priority, how the people work, and what’s going to drive the right way of choosing the right tools.

00:20:21:16 - 00:20:42:17

Chris Oates

And if you've got the right tools and your business is operating efficiently, that works with what Andrew said - saving money and therefore gives you the chance to work on your business. By doing this, you may be able to pick up some extra clients or go out and do a bit of extra work. If everything's working in the background for you and everything's talking to each other, you're not there trying to type everything in five times.

00:20:42:20 - 00:20:54:11

Young Han

And you know what the biggest strengths or the advantage of that? It is the real time data, which links to the data inside that we want to talk about.

00:20:54:14 - 00:21:19:14

Andrew Sykes

Yeah, it's real time data and it does link into that. But I will say if you implement digital well on your point Young, it's about people and it's about making people's workplace better, their job better, more efficient because you're not doing mundane, boring tasks. So, the digital aspect is about people first and foremost. I love how you touched on the change management.

00:21:19:14 - 00:21:28:20

Andrew Sykes

Part of it is work with people and change. Business is always about people and use of digital to make their lives better.

00:21:28:21 - 00:21:54:04

Young Han

And that that means that these changes shouldn't be coming from the top to bottom. It's getting everyone involved in the process. Even in RSM, we go through this workshop with all the employees. We’re telling them what kind of digital strategy we’re looking at, what kind of changes we want. We are open to everybody to put in their opinions, their experience, which makes a nice strategy that works.

00:21:54:12 - 00:22:00:14

Young Han

Also, they get the buy in of the stakeholders who are going to use it every day.

Data Insights: How to use the data you collect to make smarter business decisions

00:22:00:21 - 00:22:10:12

Andrew Sykes

Yeah. And our fourth trend is data. What do you mean by data? What does digital do for data?

00:22:10:12 - 00:22:36:16

Young Han

I think the very basic data digital journey started with bank feeds. We as accountants, no longer need to import a data entry. We know that what the business did yesterday based on the cash that comes into the bank account. We also know how the money is being spent and for what expenses and what kind of jobs that they are doing.

00:22:36:21 - 00:22:46:05

Young Han

So, as the business advisor, that gives us what we need to know about the challenges and the cash flows of the business in real time, not 12 months ago.

00:22:47:19 - 00:23:01:02

Chris Oates

It lets you make the make the decision when you want to look at it, rather than wait till the end of the year. You can adjust your strategy as you need to during the year.

00:23:01:04 - 00:23:11:12

Andrew Sykes

Yes. So, getting all your data into one spot and ensuring it's relevant and accurate and then we can progress by getting some AI. Who else has played with ChatGPT?

00:23:12:01 - 00:23:15:21

Chris Oates

You're always on it! It’s great because you ask it a question and it gives you the answer.

00:23:16:01 - 00:23:37:04

Andrew Sykes

I love ChatGPT. I think it's fantastic. It took off straight away and this is only the start of it. I don't think we yet understand how beneficial that kind of AI assistance will be in business.

00:23:37:05 - 00:23:53:11

Young Han

It's just going to get better because of the machine learning, it's going to get more information. And I'm not saying that it's not accurate, but there are some things that the answers were not accurate, but it's the start of the new norm and it's going to get smarter.

00:23:53:11 - 00:24:08:23

Chris Oates

And it can point you in the right direction to look further because you think about how much time we all spent searching for an answer online. Whereas if you use the AI gives you the general information that you might be looking for, and it means that you can really narrow your search for that more in-depth insight.

00:24:09:06 - 00:24:32:05

Andrew Sykes

Yeah, and I don't think AI is going to do everything for us, I'm not in that camp, but I certainly think it's a great tool. And as I said before about being an accountant, I love to see value creation and part of value creation is removing low value, mundane, boring tasks out of business.

00:24:32:05 - 00:24:54:01

Andrew Sykes

You can make it do anything. For example, write a quick email to a customer and it'll do all of that for you in seconds. What might take you ten or twenty minutes or half an hour to do. Really interesting that if you get start combining these trends and you get your digital business right. This means you have good data, you can actually start combining it with external data as well.

00:24:54:21 - 00:25:09:15

Andrew Sykes

Whatever economic data, whatever you can see, all can combine and then you can use that in in your own analysis rather than just the data you produce.

00:25:09:16 - 00:25:43:05

Young Han

Yeah, so, if you're in a business that has the capability to understand what the data means and collecting all the data, you can make the right combination and produce a new outcome or a result. That's the key strength of your business which makes your business stand out from others. And we've seen a lot of tech business tapping into R&D, tax incentives and all different benefits because they know what the data actually means of what they can actually do or the potential, commercial benefits of those utilising that.

00:25:43:11 - 00:26:03:11

Andrew Sykes

Yeah. Imagine doing something like “I'm a cafe owner who has a large outdoor cafe area” and I tie in my sales data, the weather data, and my payroll rostering system to work out, okay, well, that's going to be raining all weekend. This weekend I can put less staff on.

00:26:03:20 - 00:26:04:11

Young Han

Yeah, that's fine.

00:26:04:12 - 00:26:05:05

Andrew Sykes

Or more staff.

00:26:05:15 - 00:26:07:00

Chris Oates

All at the click of a button, too.

00:26:07:00 - 00:26:27:04

Andrew Sykes

At the click of a button – and that A.I predictive capability. Hopefully we're going to start seeing that coming through in business. I will say that this, like any other trend, this needs to be driven by the business side. Data needs a data champion who will not only use the data but work out how you can implement it.

00:26:27:09 - 00:26:30:07

Young Han

And remember, garbage in, garbage out.

00:26:30:24 - 00:26:41:12

Andrew Sykes

Yeah, exactly right. It does take time and investment from the business to start accessing any one of the trends that we've just spoken about.

00:26:41:16 - 00:26:54:01

Chris Oates

And as Young said, it's from bottom up. You need everybody to be involved. You can't just say one or two people are going to run this. You really do need to have everybody in your business on the same page.

00:26:54:01 - 00:27:14:23

Andrew Sykes

And adopting all these trends is a part of maturing your business over 2023. And I think after a couple of hard years with the pandemic, a bit more fun in business, I think we can all look forward to that and changing and evolving in a different direction. Well, guys, I'm glad we split this into two episodes because we're out of time for today.

00:27:15:06 - 00:27:39:04

Andrew Sykes

So, I encourage all our listeners to look out for part two of our top trends. In 2023. This is the RSM talkBIG time and thank you for listening. I encourage you to subscribe and maybe get a couple of your friends to subscribe on your favourite podcast platform. My name's Andrew Sykes. Thank you very much for listening and thanks from the team.

00:27:39:07 - 00:27:42:05

Young Han

Thank you.

Chris Oates

Thanks.

—    RSM TALKBIG – 8 KEY TRENDS FOR AUSSIE SMALL BUSINESSES IN 2023 

With Andrew Sykes, Chris Oates, and Young Han | S2 E7 PART TWO 

00:27:45:18 - 00:28:00:14

Andrew Sykes

Well, hello everybody, and welcome to the RSM talkBIG Podcast for our next episode and part two of our review or insight into the RSM talkBIG Small Business Trends in 2023 report. Sorry, thinkBIG.

00:28:03:13 - 00:28:26:10

Andrew Sykes

We're talkBIG, but we are part of RSM and one of our RSM reports is titled thinkBIG. We encourage you to go to our website, download it, It's a free report. thinkBIG Small Business Trends in 2023. My name is Andrew. I'm being joined by Young and Chris, your regular hosts of the talkBIG podcasts.

Young Han

Hi everyone. 

Chris Oates

G’day everyone.

–             Cyber security and the dark web: The massive criminal economy that could steal your money

00:28:26:14 - 00:28:52:02

Andrew Sykes

Okay guys let's get into it. We covered four trends in our last podcast, and now we're going to talk about data insights, cybersecurity, staff shortages and cash flow options, as well as some virtual CFO insights. Young, let's talk about cyber security.

–             Cyber Security 

00:28:52:02 - 00:29:13:23

Young Han

In the last episode, we talked about the data, privacy, I guess the cyber security is a bigger picture of the issues. And one of the things that are constantly coming up is about the dark web, which is like a marketplace for the people that have got someone else's data and just trade it.

00:29:14:00 - 00:29:19:00

Andrew Sykes

So, I hear the term dark web and I go, Oh, yeah, what's that? But it's massive, isn't it?

00:29:19:01 - 00:29:21:22

Young Han

It's like the third largest economy in the world.

00:29:21:24 - 00:29:22:21

Andrew Sykes

You've got to be kidding.

00:29:23:00 - 00:29:23:16

Young Han

I'm not.

00:29:24:15 - 00:29:36:16

Andrew Sykes

So, this is the dark web. We access the web through like we open up, then we open our browser and that's the web. And the dark web is stuff that is out there but not accessible through, like, normal means.

00:29:37:02 - 00:29:37:22

Young Han

Right.

00:29:39:21 - 00:30:01:18

Young Han

So, people in cybercrime, it's like it's their go-to. So, I've seen a snippet of it. It's, it's like a marketplace and people put the price up and the people trade and they rate whether they get a good trade or not and whether the information they're selling is worth it or not.

00:30:01:23 - 00:30:08:07

Young Han

But like eBay, you get to see the reviews of the suppliers and customer reviews and it's exactly like that.

00:30:08:07 - 00:30:24:02

Andrew Sykes

Wow. So, it's run like a real business. But this is a criminal kind of enterprise. As I recall when we saw the Optus scandal last year and Medicare scandal, didn't they sell some of the data on the dark web?

00:30:24:07 - 00:30:56:02

Chris Oates

That's right. Yeah. Or people can ask for a ransom to get it back. It's just I think the biggest - and we touched on it in the last episode - with privacy and the penalties that can come with it too. It's one thing if that the data gets out there and people's stuff is leaked. But if you sort of look at the businesses side of things as well, the penalties that are there - cyber security to me is about protecting your business and yourself from having to go through that process.

00:30:56:10 - 00:31:14:00

Young Han

Yeah. Because it is such a big issue in the market as well as the impact on reputation, your business and the penalty that comes with it. It is something that everybody needs to be aware of and it's not something that is “nice to have”. It's a must have.

00:31:14:19 - 00:31:39:00

Andrew Sykes

And that's because if you look at the stats and you'll see this in our thinkBIG report is that cybercrime is reported every 7 minutes. So, there is a cybercrime every 7 minutes. That's unbelievable. And apparently 60% of small businesses, small to medium enterprises, don't survive the impact of a cyber-attack.

00:31:39:05 - 00:31:50:04

Chris Oates

And I think somewhere between $40,000 up to sort of $3.5 million is the average the businesses suffer.

00:31:50:09 - 00:32:20:10

Andrew Sykes

Yeah, and we’re talking about most people. I started looking at this and started getting clients experiencing it. I thought this was all about big business. But we had a client, a small business, who was doing some construction work, and this is only a very small business. They were getting their office refit and they were emailed an invoice from their builder to pay $250,000.

00:32:20:22 - 00:32:38:00

Andrew Sykes

And so, it was their builder. They paid it and, and there was a new bank account on the invoice. They didn't think anything of it, but somebody had intercepted the invoice that was being emailed to them, put false details on there and they ended up losing the $250k, didn't they Young? Did they get that back?

00:32:38:10 - 00:32:55:20

Young Han

Well, it was a long journey, but at the end they did get it back. But it was quite scary because they're looking at it and it's like someone's looking at your email and what you're doing, and it happens quite a lot. Last year for the people who were looking to settle for the property they are buying.

00:32:55:20 - 00:33:12:00

Young Han

There's a lot of big deposit transactions happening. And this cybercrime- they’re looking, watching you, what you're doing, and then just interfere and then you get the wrong bank account and sometimes, you don't get it back.

00:33:12:12 - 00:33:20:16

Andrew Sykes

Yeah, but even if you get it back for a small business to lose $100k, $200k, $300,000 out of their cash flow can be terminal.

00:33:20:20 - 00:33:22:19

Young Han

And the stress that you will go through.

00:33:22:23 - 00:33:41:19

Andrew Sykes

Yeah, it is, it's very stressful. So, I think you were saying, okay, trends for 2023. I think we're going to see more and more cyber-attacks. It's a growing area, as you said, the dark web is massive. So, there's obviously a lot of criminal activity out there.

00:33:41:19 - 00:33:55:14

Young Han

Not only those things; not only business - in your personal level. If you're getting a weird text message from the ATO, you've got this tax to pay… any random text messages or emails, anything like that, just be careful.

00:33:55:14 - 00:34:05:20

Andrew Sykes

Wasn't that the theme of the pandemic? I know every text message parcel being delivered or ATO, so all of a sudden it moved on to your phone?

00:34:05:22 - 00:34:06:16

Young Han

Yes, that's right.

00:34:07:02 - 00:34:08:01

Andrew Sykes

Email to phone.

00:34:08:06 - 00:34:16:12

Young Han

So, it's not just for the business, it's for everybody involved in, you know, their life, their business, the employees, in your daily life.

00:34:16:23 - 00:34:26:11

Andrew Sykes

Small business needs to treat this seriously. So, you've got to look at your cyber security awareness. Your plans, your processes.

00:34:26:23 - 00:34:36:17

Young Han

There's also cyber security insurance as well in place. It's a new thing. If you're really worried about it, I recommend you have a look at it as well.

00:34:36:20 - 00:34:55:18

Andrew Sykes

Get the expert to advise you on process and policies and protection you can have and not all of it's expensive. Train your staff who are responsible for payments. For example, that if a bank account changes, ring up the person who sent the invoice and say, hey, did you change your bank account?

00:34:56:13 - 00:35:03:10

Andrew Sykes

Not all of it is sophisticated or expensive, but you do need a plan and you do need to actually do something about it.

00:35:03:14 - 00:35:16:00

Chris Oates

And I think that cyber security is about digital and businesses moving into that and, well, accelerating with the digital space. But cyber security is the key for that to be successful.

–             Staff Shortages: How to find employees and keep them happy by automating mundane tasks

00:35:16:05 - 00:35:45:05

Andrew Sykes

The next trend: staff shortages. In 2022, the unemployment rate in Australia dropped to its lowest level in 50 years. And you could certainly…it's not hard to pick that there's a trend that there's going to be less staff and it's going to impact on small businesses. So small businesses competing with larger businesses who are trying to get access to employees, hopefully we'll see some immigration.

00:35:45:12 - 00:35:52:14

Andrew Sykes

But yeah, we think that a big trend is going to be the continuation of that shortage of staff.

00:35:52:14 - 00:36:12:21

Young Han

And I think it's that that recovery process from post-COVID. So, when COVID happened there's a lot of things that impacted the staff. The job keeper was kind of helping. But at the same time, when the COVID happened and borders were closed, a lot of people chose to go back to their own country, and they never came back.

00:36:12:21 - 00:36:45:03

Young Han

And now things are coming back to normal, but it's like, well come back, but they found their life, they don't want to come back. Or they had changes in their family household as well. So that, they are taking on more responsibility to look after the kids and then they just don't want to work anymore. So as an employer and small business owners, there's less people who's willing to get back into the workforce which means that it makes it more competitive to get the high-quality staff into your company.

00:36:45:09 - 00:37:03:12

Chris Oates

And with the digital transformation, people are still the most important part of a business. The people you've got working for you in your own business. So, if there's less people out there, you want the right people in the right positions, which can mean that when unemployment’s so low, it will cost the business more because you might have to pay someone a bit more.

00:37:03:12 - 00:37:08:13

Chris Oates

So, when you're talking your small business and your cash flows that can eat into it.

00:37:09:02 - 00:37:30:24

Andrew Sykes

Yeah, it does. And I think we're getting - this has been going on a while now. While the trend is going to continue, I think one of the impacts we're going to see is that the customer is aware of this trend now. So, if you think about, you know, three or four years ago going out to a good quality restaurant and using your phone to order by yourself at the table.

00:37:31:05 - 00:37:39:12

Andrew Sykes

Yeah, you would think, oh, I'm not going to do that. I want table service. I want people to wait on me. But the customer now is quite accepting.

00:37:39:15 - 00:37:52:17

Young Han

Yeah. And you know, we get emails from childcare centres or, other businesses saying we have staff shortages, and we can't deliver that quality of service. It's going to be more time taken.

00:37:53:04 - 00:38:08:10

Andrew Sykes

Yeah. So, communicating with your customers is a really good way to cope with it, but also having a look to say, okay, well what technology can we put in place? The example of ordering yourself at the table, there's technology reducing the need for staff.

00:38:08:21 - 00:38:16:02

Chris Oates

Don't need as many people wandering around the restaurant. You basically are your own waiter.

00:38:16:08 - 00:38:38:17

Young Han

Yeah, but also, I think from a small business owners’ perspective the right strategy and system in place will attract more people willing to work for you. By you making a better position in the market, looking for people to work. So having those systems and other benefits in place will help you to be in a better position.

00:38:38:22 - 00:38:40:15

Young Han

When it comes down to staff shortage.

00:38:40:23 - 00:38:55:08

Chris Oates

And making sure people are doing the tasks that that really matter to your business making money. So, if you're taking out those sort of lower value tasks, if they can be automated, done with AI, it means that the people that are there are working in the right areas.

00:38:55:09 - 00:39:04:12

Young Han

And that in this generation, they are just different. They choose what they want to do.

00:39:04:21 - 00:39:28:14

Andrew Sykes

Yeah. So that's some of those jobs that are mundane. You just can't get anybody to do that. It doesn't matter what you offer to pay. But Chris, you're exactly right. And that's why we've worked with clients, to go in and talk to the staff, talk to the business owners, and have a look at the customers and understand what the real value provided is.

00:39:28:14 - 00:39:36:23

Andrew Sykes

And starting to streamline businesses. So, you're getting a higher efficiency, but you're also reducing waste in your business.

00:39:36:23 - 00:39:38:22

Young Han

And your employees are happier.

00:39:38:22 - 00:39:54:09

Andrew Sykes

Yeah, everyone's happier. Nobody likes doing mundane jobs. So going back to our last podcast, we said, you know, we use automation, to try and get rid of the mundane, try and get better value out of your employees, but also look after the ones that you have.

00:39:54:17 - 00:39:55:05

Young Han

That's it.

00:39:55:11 - 00:40:05:03

Chris Oates

So, if your competitors aren't looking after them or are doing a better job than you, you might see people starting to walk because people want people to work if they're doing something better than you.

00:40:05:16 - 00:40:17:13

Andrew Sykes

That mobility of the workforce - happy to pick up and move and go to better conditions, so be the one that offers the best conditions and a good working environment. 

00:40:17:13 - 00:40:18:17

Young Han

Job satisfaction.

00:40:19:05 - 00:40:19:22

Chris Oates

Exactly.

–             Cash Flow Options

00:40:20:07 - 00:40:51:17

Andrew Sykes

Yep. Job satisfaction. So, cash flow is going to be a big trend as well. So, looking at cash flow options is our next trend. We’ve just seen the ninth interest rate rise from the Reserve Bank. Interest rates are going up, cash is getting tight. So, we want to have a look at some of the ways that small business owners can get a little bit less worry, sleep a little better because they're not as impacted by cash flow worries.

00:40:51:18 - 00:41:21:20

Young Han

I think this is very important -  that you engage your accountant and have a look at this closely. Because last year when we had the COVID, the state government actually provided different incentives to the small businesses. So, a lot of businesses got a bit of capital injection. There’re some other tax incentives like a temporary full expensing, which means that you can still buy equipment or things like that and pay on a monthly basis.

00:41:21:20 - 00:41:22:19

Young Han

But you can-

00:41:22:19 - 00:41:30:20

Andrew Sykes

Explaining that fully. So temporary full expensing is when you can claim a tax deduction at the time you purchase the-.

00:41:30:20 - 00:41:31:22

Young Han

Correct, even the use-

00:41:31:22 - 00:41:41:05

Andrew Sykes

- the piece of  equipment. Not claim it over several years. So, you may get a tax deduction over ten years, traditionally Temporary full expensing, you get it all in one year.

00:41:41:07 - 00:41:45:01

Chris Oates

So, is that the instant asset writes off? Is that what that is?

00:41:45:06 - 00:42:18:11

Andrew Sykes

Very similar. So, what we're looking at is that, traditionally, when we said, okay, well, cash is going to be short this year, we'll go out and get a loan or will inject more into our business. What we're saying is that there's other things to look at. We saw that during the pandemic where businesses experience seeing cash flow problems could turn to the government, get government grants, maximize the benefits that they got through the tax system, for example, by looking at their R&D grants and incentives.

00:42:18:11 - 00:42:27:06

Andrew Sykes

So, research and development, access to various subsidies that increase the efficiency of their cash flow rather than looking for more cash.

00:42:27:19 - 00:42:52:01

Young Han

That's it. What it means is that you can still get the benefit of having that deduction, but it means that because there will be less tax for you to pay, which means you have more cash that stays in the business, which can be used for the increased prices of the supplies and all the other expenses that happened during COVID.

00:42:52:23 - 00:43:11:23

Chris Oates

And I do know, particularly on the R&D side and government grants: it's not a simple process. Not everybody's eligible. So, getting a professional  in the industry to help look at your business, go down deep into the business and see, okay, what would you be eligible for?

00:43:12:06 - 00:43:33:06

Andrew Sykes

Yep. And you're right, Chris, it’s about getting that expert in to help you. But it's not just about getting the cash to operate your business. What it is, is looking at your business and saying, if I could fund this or if I could get access to more cash, I could improve my business, I could improve the way it works. I could develop new products. 

00:43:33:06 - 00:43:49:10

Andrew Sykes

There are some great grants, not just in R&D, but looking at regional tourism, clean energy solutions. There are ways to improve your business, but get help from the government to do it.

00:43:49:23 - 00:44:22:02

Young Han

So, I guess when it comes down to cash flow, how do you achieve that? How do you increase the money that comes in? Yes, encouraging your sale is one thing, but the other thing is like tapping into those grants and incentives that allow you to have more cash coming through to your business. And secondly, with more cash flow you can invest those to improve your operation and the process saving expenses going out, which then guess what?

00:44:22:02 - 00:44:23:23

Young Han

You're going to have more cash in your business.

00:44:24:08 - 00:44:41:22

Andrew Sykes

Yeah, exactly. You're going to have a better business that's better funded and you're going to do things like develop regional tourism, like clean energy, do research and development. It's a great way to grow your business and looking at an alternate way to fund it.

00:44:42:04 - 00:44:49:09

Chris Oates

And is that only on big projects or so? Do you have to spend hundreds of thousands of dollars to get them or not?

00:44:49:09 - 00:45:11:07

Young Han

So, in the R&D incentives, you need to be in a company structure to be eligible, but also you need to lobby for you saying that you have at least a minimum $20,000 of expenditure that's spent for the research and development you're eligible for. So, if you're in a position your company's in the position that it's  tax payable, it's going to reduce your tax amount.

00:45:11:14 - 00:45:15:20

Young Han

But then if it's in a loss position, you're getting that as a cash refund.

00:45:16:14 - 00:45:22:12

Andrew Sykes

Yeah. And it can be quite small business. It can access. So, this is not just for the big a lot.

00:45:22:12 - 00:45:41:07

Young Han

Or startups. If they do have the proof of concept and that's what they're doing. You just need to have a chat with the R&D experts, make sure that you're eligible to receive those incentives. And because there is a bit of process involved, you need to get the application in. And it's a claim that is a part of your tax return.

00:45:41:07 - 00:45:47:01

Young Han

So, it is important that you get advice and then get it right so that you can maximize your benefit.

–             Virtual CFO

00:45:48:03 - 00:46:18:03

Andrew Sykes

Excellent. So, the last trend we're going to have a little bit of a look at is Virtual CFO. It's an unusual term, but virtual CFO is what we're really looking at is saying that as a business, we don't need to go and employ someone. We can go and buy this service of a CFO externally, but generally for a lower cost and a better output than if we are hiring someone ourselves.

00:46:18:12 - 00:46:50:07

Young Han

And it's only possible because of the other trends that we mentioned in this episode, in the other episode is that digitization of the business process and how people interact and having that enabling that access to the real time data makes the virtual CFO role to do what they can do with the data that they’re getting. Because you're not waiting on someone else to print out an Excel spreadsheet to you to do the analysis, you have the real time access to the system.

00:46:50:07 - 00:47:01:16

Young Han

You know what they're doing. And because another advantage will be that having someone outside of the organization gives you that different input because they’re not in the business day-to-day.

00:47:01:20 - 00:47:28:08

Andrew Sykes

You are 100% right. So as the technology gets more sophisticated, what businesses are no longer doing is paying to have data prepared. So, they prepare high quality data themselves, but they're paying to have it interpreted. I really look at this as technology gets more sophisticated, it gets less accessible.

00:47:28:08 - 00:47:43:19

Andrew Sykes

And it's only the outputs. The best way I've thought of this is if I think of the car that I bought when I was at university 30 years ago, it was this beautiful 1975 valiant VJ Ranger. Lime in colour.

00:47:44:03 - 00:47:45:23

Chris Oates

Still dreaming about it, still driving.

00:47:45:24 - 00:48:09:05

Andrew Sykes

It was a wonderful car, but I could fix everything on that car. I could service that, I could do the timing, the brakes. It wasn't much that went wrong in that car that I couldn't fix. If I went and looked at a modern car, I wouldn't even know where to start. So as cars have gotten more sophisticated, we've really said, well, we need to get the experts. I’ll pay a mechanic to fix it for me because all I want is a car to run.

00:48:09:19 - 00:48:22:22

Andrew Sykes

And we're seeing the same trend in business where I'll pay the expert to come in and tell me what I need to know.  And I’ll prepare the data and develop it myself. But when it comes to expertise, I'll bring that in from the outside.

00:48:22:22 - 00:48:46:17

Young Han

And more importantly, I think this will give you that life work life balance that you want. You’d rather spend that time for developing your business and then free up your time and be less stressed because you can do that. When you free up that time and have energy to develop your business, you can afford to have another virtual CFO.

00:48:46:22 - 00:49:05:01

Young Han

In the past, I think a lot of people think that ‘We’re not a big enough business to afford a virtual CFO.’ Think again, because the money that you save and the energy the mental energy and the stress that you save is far less than the benefit that you're going to get from having a virtual CFO.

00:49:05:03 - 00:49:22:02

Chris Oates

The amount of business owners that work in the business during the day and then go home and have to do the numbers and the books and everything. If you've got the data, if you got the digital data there, it's the old, as we talked about with the data insights and having the single source of truth and everything feeding in, it'll just give you that freedom, as you said.

00:49:22:02 - 00:49:22:08

Chris Oates

Yeah.

00:49:22:14 - 00:50:06:14

Andrew Sykes

Yeah, exactly right. And it's about why do I spend hours doing bookwork? It's how I can get the results at the end of it. So, we shortcut to the why and we get things like three-way models and, you know, forecasts and budgets that help us actually operate our business a bit better. The democratisation of advice, things like Xero, if you look at something like Xero, it really brings what big business had ten, twenty years ago down to the small business for a fraction of the cost;, small monthly fee, and you're getting an automated accounting system that gives you real advice. 

00:50:06:14 - 00:50:13:24

Andrew Sykes

And then if you had a virtual CFO service on top of that, you're maximising what you're getting out of the data that you produce.

00:50:13:24 - 00:50:34:00

Young Han

And I think we talked about all these different trends that eight trends in that we’re expecting to see in 2023. They are not silos. If you are looking at it, they are interrelated. So, have a look through, read the report. If you do have any questions, get in touch with us so we can guide you through to the right direction.

00:50:34:08 - 00:51:00:11

Andrew Sykes

Stay ahead of the game in 2023 for small business owners. Well, guys, we've reached the end of this episode. Thank you very much. Young and Chris and from the team at RSM and our talkBIG podcast. Thank you very much for listening. I encourage you to subscribe on your favourite podcast platform and if you get the opportunity, refer a friend to our podcast, would be great to have more listeners.

00:51:00:24 - 00:51:04:01

Andrew Sykes

My name's Andrew, and from the team, Thank you very much.