Managing Cash Flow, Rising Costs and Workforce Pressures in the SME Environment

As 2025 draws to a close, many small and medium-sized businesses (SMEs) are feeling the squeeze. Wage costs have climbed, supplier prices remain stubbornly high, and competition for skilled staff continues to pressure margins. Add to that the seasonal cash-flow crunch leading into Christmas and it’s no surprise many business owners are feeling stretched.

As SMEs can expect continued economic challenges, now is the time for proactive planning to navigate them and start the 2026 year ahead.

Understanding the Cost Pressures

SMEs are currently juggling several overlapping challenges:

• Higher wage and superannuation costs – with the Superannuation Guarantee now at 12%, employers have permanently higher on-costs that must be built into payroll budgets.
• Rising input, energy and insurance costs – while there have been several interest rate cuts in 2025, many industries, particularly energy, have seen double-digit increases over the past year, squeezing profits if prices aren’t reviewed regularly.
• Staff shortages and recruitment pressure – finding and retaining quality people often requires higher salaries, sign-on incentives, or greater flexibility.

Together these factors make effective cost management and forward budgeting critical.

The Christmas Cash-Flow Pinch

For many businesses, December and January bring a double hit of reduced trading activity alongside increased outgoings for staff leave, bonuses and public-holiday pay. Service-based businesses often experience a lull in debtor payments as clients close early or delay invoices until the new year.

A clear view of upcoming cash requirements can make the difference between a stressful start to the year and a smooth transition.

Tips for managing the year-end period:

• Forecast short-term cash flow weekly across December to January to anticipate gaps early.
• Prioritise debtor collection and follow up overdue invoices before businesses close for the break.
• Review payment timing for major suppliers and negotiate temporary extensions if needed.
• Build cash reserves and funds for wages and super so staff entitlements are covered even if income slows. This includes being prepared for other unexpected costs or downturns.
• Use accounting software like MYOB or Xero to automate financial tracking and provide a real-time view of your cash position. Software can also improve and automate invoicing and debtor collection.

Reassess Your Cost Structure

Many SMEs set prices or budgets once and rarely revisit them as conditions change. Accountants can play a valuable advisory role by helping clients:

• Conduct a cost structure review to separate fixed from variable costs and identify savings opportunities and tighten expense management.
• Use scenario planning to model the effect of 5 to 10 % increases in wages, rent or utilities and prepare response plans.
• Explore automation and technology that streamline processes and reduce manual labour costs.
• Even small adjustments such as reviewing supplier contracts or tightening stock control can make a noticeable difference to cash flow.

Planning Ahead

Once the short-term pressures are managed, establish a rolling 12-month forecast. This allows business owners to model the impact of future cost changes, tax payments, and seasonal cycles before they occur. Regular check-ins with your accountant can help identify potential risks early and plan accordingly.

Final Thoughts

Economic conditions remain challenging, but with strong financial visibility and proactive planning, SMEs can navigate the pressures successfully. The key is to stay informed, monitor cash flow closely, and seek advice before problems arise.

At AGR, we work with business owners to plan, budget and model their operations, helping them manage cost pressures with confidence. If your business could benefit from a year-end cash-flow review or scenario-planning session, now is the perfect time to contact us.

For More Information

As SMEs face rising costs and cash-flow pressures as we move towards the end of 2025, proactive planning, effective cost management, and regular financial reviews are essential to navigate seasonal challenges and start the New Year in a positive position. For expert support and tailored guidance, contact the adviser team at Archer Gowland Redshaw on (07) 3002 2699 | info@agredshaw.com.au.