Small businesses in PH confident of growth by 2024 – adobo Magazine

MANILA, PHILIPPINES – Nearly 90% of Philippine small businesses expect to see growth by 2024 as the country ranks first among 11 surveyed markets in the Asia-Pacific region for the third consecutive year, according to new research conducted Through CPA Australia.

CPA Australia’s “Asia Pacific Small Business Surveycollected opinions from 4,222 small businesses in 11 markets in Asia Pacific, including 303 from the Philippines. Despite a small revision to economic growth forecasts earlier this year, small business owners remain positive about the local economy, with eight in 10 expecting the local economy to grow this year.

“Buoyed by optimism in the local economy and strong growth momentum among small businesses, more than half (54%) of Philippine small businesses plan to add more workers by 2024, the second highest among the markets surveyed “, thus Darlow Parazoa fellow Certified Practicing Accountant (FCPA) from CPA Australia in the Philippines.

“One of the key growth drivers is the increased adoption of technology and the introduction of AI in the business process outsourcing (BPO) industry,” said Darlow.

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The research shows that 78% of small business owners are under the age of 50 and that younger owners are more innovative and eager to embrace the technology and popularity of e-commerce platforms, especially in retail. In fact, 62% of companies surveyed said their technology investments improved their profitability by 2023, beating the survey average of 53%.

The study found that the strong momentum of Philippine small businesses is strongly linked to their focus on customer loyalty, strong customer satisfaction and business strategy. Respondents nominated customer loyalty as the top factor positively impacting their business over five conservative years, and improved customer satisfaction ranks in the top four factors positively impacting businesses in each of the past six years.

An overwhelming majority (89%) of Philippine small businesses used social media last year for various business purposes, such as promoting to potential customers (63%), communicating with existing customers (60 percent), selling products or services (59% ) and receiving customer feedback (42%).

Last year, 68% of small businesses needed additional financing, and almost half of these used it for business growth. Nevertheless, only 19% found it “easy” or “very easy” to access external financing, which is the lowest ranking among the markets surveyed. And they were also the least likely to seek money from banks compared to their counterparts in the other markets surveyed.

The increasing costs and difficulties in accessing external funds can hinder financial returns and development plans. 46% say higher costs had a negative impact on their business last year. The substandard accounting records of many small businesses are likely to make it more difficult to access external financing. The increase in material costs (50%) remained the cost most felt by local businesses, followed by utilities (42%) and taxes (31%).

“Many Philippine Micro, Small and Medium Enterprises (MSMEs) are suffering from rising costs due to persistent high inflation driven by strong domestic demand, hence the Bangko Sentral ng Filipinas (BSP) is cautiously considering interest rate cuts to support economic activity while containing inflation risks. Over the next two years, we may see a gradual reduction in interest rates, which will likely impact borrowers and investors in the Philippine SME sector,” Darlow said.

Darlow added: “The survey shows that taxes were a barrier to the growth of some Philippine small businesses in 2023. We expect that the recently introduced Ease of Paying Taxes Act will ensure that fewer micro and small businesses will cite tax as a barrier in the coming years. Under this law, business taxpayers are classified as micro, small, medium or large taxpayers based on their gross turnover. Micro and small taxpayers can now access a range of special concessions, including simplified income tax returns. MSMEs should consider seeking professional advice from accountants to understand how the changes may impact their business.”

The survey results show that many Philippine small businesses are undertaking activities closely related to environmental, social and governance (ESG) issues. Many local small businesses are focusing on workforce health (41%) and supply chain sustainability (38%), a significant increase from 24% last year.

Darlow suggested that Philippine SMEs continue to invest their resources and efforts in ESG: “Sustainable development is an irreversible global trend. Along with multinationals’ increasing focus on ESG regulations, MSMEs should seek to better understand their customers’ ESG requirements, especially with regard to supply chain management.”

Read more about CPA Australia here.