The success of the New Zealand economy rests on the backs of small businesses. Collectively, small businesses make up more than a quarter of New Zealand’s GDP, and businesses with fewer than 20 people make up a whopping 97% of the total number of New Zealand enterprises.
With the Government to set out their policies and priorities for the years ahead in the 2017 Budget this week, there are some key things that I would like to see in the Budget to better support our small businesses.
ADDRESSING LATE PAYMENTS TO SMALL BUSINESS
We’ve seen a lot of discussion out of Australia on the issue of late payments by big companies to small businesses, and how they’re suffering as a result. The issue really hit a nerve for entrepreneurs and smaller operators that many small businesses here can relate to.
Earlier this year, Xero did some digging into who the biggest culprits are when it came to late payments to small businesses. Collected from millions of invoices over a six month period, we found that:
- Across all of Xero’s small business customers, 58% had invoices overdue by more than 30 days
- One in six invoices payable by NZX50 listed companies to small businesses was overdue by more than 30 days
- 70% of small businesses had invoices overdue by more than 30 days at any time, causing them to experience a cash flow gap
I expect the New Zealand Government has picked up on this sentiment so it will be interesting to see what comes out of the Budget on this front. The introduction of maximum payment times for business transactions, and the Government taking a stand on the issue, would benefit small businesses.
LOWER THE TAX BURDEN ON SMALL BUSINESSES
As New Zealand small businesses increase their exporting efforts, I’d like to see the Government support their growth by reducing the corporate tax rate.
The Australian Government announced in their Federal Budget that they’re committed to dropping the tax rate in Australia from 30% to 25%, which means Aussie businesses will soon have more cash to play with – upping their ability to invest in in new staff and new infrastructure and therefore boosting their ability to vie against New Zealand enterprises. We need to do the same here or risk stifling the competitiveness of our small businesses.
GETTING BEHIND STEM EDUCATION
The $257 million funding boost for STEM (science, technology, engineering, and maths) education announced by the Government last year was an acknowledgement of just how important investment in the area is. This year, the Government announced an extra boost $5 million to go towards their Teach First NZ initiative which, of the number of teachers they’ve taken onboard to date, just under half have graduated as maths, science, or technology teachers who work in schools with big achievement challenges.
I feel optimistic that the Government seems to be recognising the importance of STEM education, and I hope there is more to come out of the Budget on Thursday.
BACKING A WINNING HORSE
Supporting New Zealand tech start-ups, and the technology industry more broadly, to continue smashing growth statistics as one of New Zealand’s highest export earners makes total sense.
Our tech sector is growing at the rate of double-digits across market sectors and company sizes, and the industry’s exporting efforts broke through the $1 billion mark for the first time last year. With that growth is a boost to the number of jobs in technology, and many of them are with our local success stories or young start-ups. A good Budget will invest in that growth to support the innovative work happening within our young (and old!) tech companies. The pre-Budget announcement that Callaghan Innovation will receive a $75 million funding boost for R&D was a nice little teaser – I hope to see more like that to come.
Overall, last year’s Budget was pretty ho-hum for small businesses (apart from the changes to provisional tax, which was welcome for sure), but there was nothing else that really stuck out as a win for entrepreneurs and smaller operators. Here’s hoping the Government uses 2017 (and the likely surpluses in the Government’s coffers) as a chance to employ policies that really make a difference for our small businesses.