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One in five small businesses left behind in the digital divide



MYOB says incentivising digital adaptation worth $10bn economic injection

Nearly half a million Australian SMEs have no or very low levels of digitisation in their business and getting them online would be worth a $10 billion injection to the Australian economy, says business management platform MYOB.

MYOB calculates 466,062 SMEs – approximately 20% of the 2.29 million* sector – are not engaged with digital tools across critical areas of their business workflow, such as compliance and supplier management.

Fresh research of 1000 SMEs from MYOB** delves further into typical digital use among the small business community, finding 40% of businesses use digital cloud-based software for work in progress (WIP) management, 38% for managing their people and 37% for growth opportunities, such as marketing. Just 26% of SMEs are connecting with their customers on social media.

With SMEs with advanced levels of digitisation 50% more likely to grow revenue***, MYOB views support packages that bridge the digital gap for the one in five left behind as an economic imperative. MYOB forecasts a 1.8 per cent increase in the SME GDP contribution, or a $10.5 billion gain for the Australian economy, if remaining SMEs are brought up to speed.

MYOB’s Chief Employee Experience Officer Helen Lea says the most effective tool Government has at its disposal is the tax system and cloud-based software as a service (SaaS) products are the perfect gateway for SME digitalisation.

“Our new research tells us 24% of SMEs are worried new technology is too expensive and a further 24% don’t have the time to set it up.  Of the businesses who digitised during the pandemic, 39% found themselves to be more productive and 34% were more profitable. Eighty-five per cent said they were able to keep their business running thanks to digital tools.

“For the one in five SMEs at risk of being left behind, a tax incentive that is easy for businesses to engage with, that is pointed out to them by their accounting and bookkeeping advisors with whom they speak regularly, will remove a significant hurdle to digital adaptation. Our research supports this: 27% of respondents shared that an incentive, such as a tax deduction, would help them get started.

“SaaS model software is custom built for the SME way of working. Cloud-based SaaS products allow businesses to work however and wherever they like and the subscription model allows a business to grow their software use with their operations.

“We are recommending to Government that they consider a refundable rebate on new SaaS subscriptions for SMEs with 0-199 employees, with a tiered incentive structure to promote end-to-end digitisation of businesses. This change alone we predict is worth $10.5bn to our economy in the short term.

“If you combine this with the annual saving of $23.5bn afforded by a mandatory introduction of B2B e-invoicing, adoption of which could also be motivated by this SaaS incentive, it’s a pretty compelling case for putting our trust in small businesses as Australia’s economy recovers and grows.”

MYOB has released a white paper outlining its SaaS tax incentive proposal in full. It can be accessed here: https://www.myob.com/au/about/media-centre

 

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* ABS February 2021

** MYOB Business Monitor, June 2021

*** Connected Small Business 2017, Deloitte Access Economics

466,062 MYOB forecast based on SMEs, with no or low levels of digitisation, digitising or further digitising: Accounting; Production & Services Operation; Invoicing; Stock Control; Marketing; Human Resources (including Payroll); and Business Planning processes. SMEs are defined as < 200 employees. Growth comes from 100% of SMEs with low or moderate levels of digitisation, in addition to 50% of SMEs with no digitisation. This equates to a net of 36.6% of all SMEs (varying between 35.8% - 47.9% of SMEs depending on industry). Excludes Financial & Insurance Services; Public Administration & Safety; and Education and Training (due to insufficient data). Assumes a productivity-related revenue uplift of 9% based on international benchmark.