Benefits of boosting SME productivity

Australian SMEs are the engine room of the economy and these experts say helping them to build their productivity muscle is fundamental to arresting the steady decline in national growth.

Australia’s productivity growth has declined in recent years. Yet many now argue that our economic future doesn’t hinge on billion-dollar mining deals or multinational tech giants, but on the florist down the street or the tradesman with a van.

“We need an ecosystem that’s more supportive of small business,” says Bruce Billson GAICD, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).

In an address to the National Press Club in Canberra in June, Treasurer Jim Chalmers announced productivity would be the primary focus of the Labor government’s new term. And there are many reasons why small to medium enterprises (SMEs) may be the ones to shift the needle.

Benefits of boosting SME productivity

1. Increases overall economic growth

There’s a broader economic opportunity for Australia if SMEs make productivity gains.

Australian Bureau of Statistics figures show that small businesses (employing up to 19 people) make up 97.2 per cent of all Australian businesses. Medium businesses (employing 20–199 people) make up a further 2.6 per cent.

These sheer numbers make SMEs a real source of dynamism, growth and innovation, says Alex Robson, deputy chair of the Productivity Commission. “If we’re going to get productivity and growth moving in the aggregate, that’s going to be one of the places it will have to come from, just as a matter of accounting.”

2. Boosts household spending power

Robson points out that improvements in productivity are a key determinant of increases in real wages and living standards. “In 1901, it took the average worker 473 hours to purchase a bicycle on the average wage. Today, it takes just six hours. That change can only come about by working smarter — it didn’t come about because we’re working longer hours or putting in more effort.”

3. Supports innovation

Productivity improvements often arise through innovation-enhancing processes, introducing new technology or using smarter management techniques.

MYOB CEO Paul Robson GAICD sees SMEs as the bees in the broader business ecosystem. “The healthier they are, the healthier the entire ecosystem is,” he says. “That’s why productivity in this sector is so important.”

4. Frees up time and resources

Increasing productivity also means wasting less time on low-value tasks, paving the way for a focus on strategic growth. It may also involve freeing up resources to reinvest in people and technology. Streamlining business also necessitates focusing on back-of-house operations.

“No-one got into business to fill out a BAS quarterly,” says Billson. “There’s scope to embrace technology and lift productivity… so people can really focus on the value they add and the delight they’re seeking to provide their customers.”

How can we make it happen?

1. Thoughtful digitisation

Moving to digital systems and digital technology is one of the fastest ways that small and medium-sized businesses are able to make significant improvements in their efficiency and productivity, according to Paul Robson.

“Shifting from paper-based to digital workflows is one way that small businesses can reliably save themselves hours of tedious manual work,” he says.

But the digitisation must be planned and thoughtful. “It’s important to implement the right tools that integrate well together, rather than just adding more tools,” he warns.

2. Strategic use of AI

For SMEs, AI offers enormous implications for productivity because it helps to automate tasks within businesses, freeing up time for employees to focus on higher-value-adding activities, says Rhiannon Yetsenga, an associate director at Deloitte Access Economics.

Deloitte’s recent AI for Business: APAC trends in AI platform adoption report identified that AI-enabled tools help to level the playing field for SMEs by allowing them to do more with less. AI, notes Yetsenga, is different to previous waves of innovation, where significant investment or access to specialist skills were needed to reap the benefits. SMEs need to build greater awareness of what AI could do for their businesses and how to embed it into their workflows. “Then it’s a case of seeing the benefits it creates,” she says.

3. Policies that stimulate, not stifle

Running a small business can involve various obstacles that hinder productivity.

“[That means] the more ways the government can introduce incentives and ways to stimulate business, the more productivity will be driven up,” says Alex Robson.

As part of its 14 steps to boost Australia’s small and family businesses, ASBFEO has proposed a tax discount/offset scheme that would allow new SME owners to keep more of their income to re-invest in their business during the critical first three years.

“We’ve foreshadowed a model where you’d get half your tax back in that first year, a third of it back in the second year and a quarter in the third year,” says Billson.

4. Right-sized regulation

Billson urges regulators to design new measures with special consideration for SMEs. “When we’re thinking about a new risk that needs to be addressed or some public concern policymakers need to respond to, or even the sophistication needed to engage with reporting obligations and the like, it’s not often designed with smaller businesses front of mind.”

Another ASBFEO step is for every cabinet submission, preliminary and formal regulatory impact statement, and new policy proposal to include a small business impact statement.

5. Exploring financing options

Getting finance can be a significant challenge for SMEs. Sometimes, it is only offered at steep interest rates or with onerous terms and conditions. “To the extent we can get more competition and greater innovation in the financial sector, that’s another place to look,” says Alex Robson.

Billson points out SMEs don’t have deep balance sheets and can’t go to shareholders to access more capital. “The choices available tend to be more constrained. Yet the consequences of not getting things right can be more profound.”

CASE STUDY #1 Jim Wild’s Oysters

Oyster farmer Sally McLean says investing in technology and optimising cultivation techniques are ways of boosting productivity. Recent relentless rains have closed the Shoalhaven and Crookhaven rivers on the NSW South Coast, preventing her from harvesting the Sydney rock and Pacific oysters the third-generation family business grows there.

“Our oysters need salinity to survive,” she says. “Long periods of freshwater can lead to high mortality rates.”

After five years of challenging weather, McLean borrowed almost $50,000 to purchase a wet storage tank. The tank holds up to 2400 dozen harvested oysters to maintain freshness and quality so they’re always available to customers — no matter what the weather is doing. While that sounds like a lot of oysters, it only represents two weeks’ worth of farm gate sales. “It’s about making sure we have stock on hand to get us through until the river reopens,” she says.

Expanding their leases, diversifying the types of oysters grown and experimenting with different cultivation techniques are other ways the business has boosted productivity. Switching from “tray rack and rail” (open-top baskets) to a different system of floating baskets has created a more optimal growing environment.

Like many other SME operators, McLean still finds herself multi-tasking. “I do every job — from harvesting, grading and opening oysters, to serving customers, admin, and paying bills and wages.”

CASE STUDY #2 Bondi Records

As “chief vinyl pusher” at Bondi Records, Craig Fordham smiles when emails arrive addressed to the “team”. “We have a few brilliant casuals who help out with packing orders and working the shop floor,” he says. “However, beyond that, it’s a one-person engine room.”

Fordham is currently in the process of hiring a small full-time team to reduce bottlenecks. This should guard against burnout and allow him to focus on strategy, partnerships and scaling. Other challenges have involved managing inventory and coordinating suppliers. Bondi Records manages stock across more than 18 global suppliers, each with different pricing formats, update cycles and availability windows.

“For years, we handled reordering manually — comparing spreadsheets, checking Shopify sales, calculating landed costs after GST, FX and freight, and building purchase orders by hand,” says Fordham. “[It] took four to five days a month, was prone to errors and often led to missed sales when we ran out of stock.”

Bondi Records is building an internal tool that ingests supplier feeds, flags out-of-stock or high-demand titles, and generates optimised purchase orders based on price and lead time.

“This upgrade is already saving us hours each week and providing more transparent oversight of how we deploy working capital,” he says.

The business has also ditched the fragmented spreadsheets and lagging accounting reports of its early days, rebuilding financial systems from the ground up.

“We conducted a line-by-line cost audit, renegotiated supplier terms based on our buying power and introduced margin calculators that factor in freight, FX, GST and duties,” he says. “Financial visibility is now baked into Bondi Records’ operations.”

This article first appeared under the headline 'Bulking up’ in the September 2025 issue of Company Director magazine.