As a proud Kiwi, I am passionate about NZ Inc. We have so much potential to change the world from just a small set of rocks in the South Pacific and as a country we need to harness this, and foster growth and innovation. During my Xerocon presentation this is what I wanted to explore – the what ifs and more importantly – the hows.
At present, small businesses in New Zealand make up 97 percent of all enterprises and contribute around 28 percent of GDP. It’s also said that while Kiwis are exceptionally hard workers, we struggle with low productivity levels. But what if small businesses contributed 50 percent of our GDP? What if our productivity levels were the best in the world and our children and children’s children were guaranteed a better life? What if you could make a difference?
We can’t do it alone. It’s going to take a village to achieve what we want to achieve. We need multiple connections coming through and importantly, we need insight into how we are going so we can track and monitor progress.
Enter Xero Small Business Insights (XSBI) – a dashboard designed to deepen the understanding of New Zealand’s small business economy. Updated monthly, the data covers five major pillars – cash flow, getting paid, hiring people, trading overseas and cloud adoption. It is based on anonymised and aggregated data drawn from more than 300,000 New Zealand subscribers using Xero.
It’s through XSBI that we can identify opportunities and barriers for Kiwi small businesses – as well as giving you, our accountant and bookkeeping partners, insight into how you can provide further value to clients.
Learning to better manage cash flow
Take the cash flow metric for example. In July 2018, 55.4 percent of New Zealand small businesses were cash flow positive in the month – higher than annual monthly average of 50.4 percent. A good result, especially when we compare ourselves to the likes of the UK or Australia, but it still means that at any given time, almost half of all Kiwi small businesses are not cash flow positive.
How can you use this insight to help your clients? Firstly, we can see that cash flow tends to dip each time small businesses are required to pay provisional tax and GST. Therefore, this can be used as a conversation starter to explore options like AIM budgeting or review payment terms. There is also an opportunity to review lending options available to your clients and consider overdraft facilities and short term lending.
Helping your clients get paid faster
In June 2018 the average invoice paid via the Xero platform was paid 8.3 days late. Invoices with shorter payment terms, such as seven or 14 days, took the longest pay, while invoices on 60 or 90 day payment terms were paid on time or even early.
This delay has the power to cripple a small business, especially if it’s constantly occurring across all invoices. Use this insight to talk to your client about how to get paid faster. Some options to consider include invoicing directly from Xero and making use of e-invoicing, Xero-to-Xero connections and invoice reminders if they don’t already.
Talking about delayed payments can also open the door for you to discuss things like discounts for prompt payments or offering different payment methods. For example, we can see that invoices paid via Stripe or Paypal (in conjunction with the Xero platform) are paid 10 days faster than other invoices. This makes a very attractive proposition for small businesses to embrace new technology for quicker payments.
Building the best team
Small business hiring has started to soften slightly with a 1.3 percent reduction in the number of Kiwi small business employees from May to June 2018. Rest assured though, when looking at the annual trend small businesses are growing at 7.5 – 10 percent which is significantly quicker than the national average. As a result, this slow down has largely been attributed to the talent shortage New Zealand is experiencing.
For those clients looking to expand, or even those just thinking about it – it’s worth you having a chat to make sure they are in the best possible position to access talent when they need it. As well as considering current staff engagement and retention, and business values, you can be on hand to help them plan ahead for seasonal requirements and succession planning. It is also worth talking to them about flexible working environments to broaden appeal and attract a variety of potential employees.
Our trading overseas metric is a macro level indicator that measures the month on month percentage change in the total dollar value of imports and exports for NZ small businesses. Between June 2018 and July 2018 there was an overall increase of one percent in the total dollar value of imports and exports for Kiwi small businesses. We have also seen significant currency fluctuations particularly between the Kiwi dollar and the Greenback. In real terms, this means that as a country we are looking at a 10 percent price rise due to the US exchange rate – not ideal when you think about retailers stocking up on products in the lead up to Christmas.
There are a number of ways you can help support your clients on their growth journeys. Consider leveraging your network – can you make introductions to other clients with overseas experience, or connect them with local incubators such as Icehouse or Landing Pad?
There is also an opportunity for you to advise on tax and business regulations in other markets or discuss what Xero plan is best for their growing company, especially if they may have multi-currency requirements in the future.
Xero Small Business Insights presents an opportunity for all our accountants and bookkeepers to have strategic conversations with clients and further ingrain themselves as trusted advisors. You are the trusted advisors, you know the wider complications, and you have the opportunity to make the difference. We are hugely excited about what XSBI can tell us – both now and in the future – and look forward to taking all our partners with us on this journey.