If it feels like you are working harder for less, the numbers agree with you. NAB's monthly business survey for August, released on Tuesday, shows business conditions fell 5 points to minus 1 index points. That is the first negative reading in six years and the lowest since August 2020.

The key numbers

  • Business conditions: down 5 points to minus 1.
  • Business confidence: down 2 points to minus 8.
  • Profitability: down 10 points to minus 9, a post-COVID low.
  • Trading conditions: down 5 points to plus 4.
  • Employment: down 1 point to plus 3.
  • Capacity utilisation: 82.5 per cent, down 0.6 percentage points.

The weakness was broad. Conditions fell in six of the eight industries surveyed, led by construction, mining and manufacturing. Victoria and Western Australia recorded the largest monthly falls, each down 13 points.

The real story is the margin squeeze

The most useful line in the survey for a small business owner is about costs. Purchase costs grew at 2.3 per cent in quarterly terms, while product prices rose only 0.8 per cent. NAB Head of Economics Gareth Spence noted that "cost growth has been running well ahead of product price growth for almost six months", and that this is now flowing through to profitability.

In plain English: many businesses are absorbing higher input costs rather than passing them on, and profit is wearing the difference.

What to do about it

  • Know your current margin. Run a profit and loss for the last three months and compare gross margin to the same period last year. A slow leak is easy to miss when sales look steady.
  • Review pricing on purpose. If supplier costs have risen several times since your last price change, a small, well explained increase is usually better than a large one later.
  • Re-quote your big inputs. Freight, insurance, software and merchant fees are all worth a fresh quote once a year.
  • Watch cash, not just profit. In a soft patch, customers pay slower. Tighten invoicing, follow up overdue accounts early, and keep tax and super money set aside so BAS time does not become a crunch.
  • Check your PAYG instalments. If profit is genuinely lower this year, your instalments may be based on a better year. You can vary them, but the estimate needs to be reasonable and supported by your figures.

Keep perspective

A survey is an average, and plenty of businesses are still trading well. Employment and trading conditions both remain in positive territory. The point is not to panic, it is to look at your own numbers with clear eyes. If your margins have slipped, the earlier you see it, the more options you have.

This is general information only. For decisions about pricing, staffing or tax instalments, talk to your accountant about your own figures.