As we near the end of 2025, I have reflected on what I saw this year. The economy continues to be one of multi speeds, with some businesses doing very well and others struggling.

The one thing I have seen this year is a genuine tightening of spending in the economy as businesses and consumers deal with the increased cost-of-living pressures. This resulted in many SMEs with whom I've worked finding it harder to navigate the challenging environment. It showed up consistently across industries, business sizes and regions.

If you run an SME, you likely felt at least one of these:

Margin squeeze, tightening cash flow, increased compliance burden and a significant increase in ATO debt recovery activity.

While these pressures defined the year, they are also a continuation of the challenges businesses have faced since COVID. These include supply constraints, price rises, energy supply constraints, increased regulation and global geo-political risks. So in many ways, the environment has been challenging for some time, and businesses have not had a chance to recover from the COVID impacts.

What I Saw Across My Client Work in 2025

After supporting a large number of SMEs this year, there are five patterns I've clearly seen:

Margin squeeze became the norm: Input costs rose again, but many businesses hesitated to adjust pricing. The result: silent erosion of profitability.
Cash flow tightened across the board: Revenue may have held steady for some, but liquidity did not. Slower customer payments, higher operating expenses and increased debt servicing all compounded.
COVID arrears still lingered: The "COVID hangover" continued. Deferred tax, accumulated obligations and pandemic-era decisions played out in 2025, not 2021.
The ATO returned in full force: After years of leniency, the shift was sharp. Directors and owners now faced increasing pressure to engage early, not react late.

I continued to witness many industries face insolvency distress.

Construction was struggling with cost overruns and rigid contractual agreements. Healthcare operators faced rising staffing costs.

Transport businesses were faced with cash flow timing between alarming fuel costs and customer payments.

Retail remained unpredictable.

Some segments thrived, others deteriorated quickly.

The common thread was this: businesses weren't failing because revenue collapsed; they were failing because the pressure points all hit at once.

What SMEs Should Carry Into 2026: My advice

One of the first things I’ve noticed heading into 2026 is the shift in superannuation payment timing. Many SMEs will feel their cash flow tighten as they move from quarterly payments to aligning super with payroll.

From my experience, planning early makes this transition far smoother.

Another key trend is the continued “multi-speed” nature of the economy. Some sectors will grow, others may slow, and this imbalance can bring both risks and opportunities. To navigate this landscape confidently, I’ve found a few areas worth prioritising:

Strengthen your risk strategy: Risk management can no longer sit in the background. I’ve seen firsthand that businesses that actively review and tie risk directly to decision-making are the ones that stay ahead.
Guarantee appropriate funding lines: 2025 reinforced what I already knew -funding flexibility determines your options. Negotiating under pressure is never ideal, so plan your lines now, not when cash flow is tight.
Elevate financial visibility: Month-end reporting, cash flow forecasting, and KPI tracking are no longer “nice to have.” I’ve observed that without clear visibility, action always comes too late.

In this state of global unpredictability, forecasts may vary, but there are still several markers that stand out to me.

Interest rates may rise moderately, affecting businesses with tax debt or variable facilities first.

Input costs could increase in certain sectors, consumer spending will probably be uneven, and regulatory pressures - including ATO enforcement - remain elevated.

While there is no cause for concern, it does highlight that preparing in advance is vital.

2025 has been one of the busiest years I’ve experienced at AS Advisory. Across sectors, I’ve witnessed challenges met with resilience, discipline, and decisive leadership.

The businesses that protected their position weren’t always those with perfect numbers;, they were the ones that acted early, sought clarity, and made informed decisions.

I’m grateful for our incredible team at AS Advisory, our clients who trust us in the toughest moments, and our partners who collaborate with us to deliver measurable results.

Looking Ahead to 2026

As I look toward 2026, my goal hasn’t changed. I want to help the people behind the businesses - the ones navigating shifting conditions, strengthening their foundations, and seeking confidence in the direction they’re heading.

I also want to continue supporting the partners - accountants, lawyers, and advisors - who guide these businesses, by being a clear escalation point when complex challenges arise.

If any of this feels close to what your clients are experiencing, or if you see areas where you need support yourself, you don’t need to wait for things to become urgent.

I’m here to talk through where you or your clients are currently standing and what the first steps could look like for the new year and beyond.

Book a conversation with me here https://calendly.com/andrew-asadvisory/30min