This iteration of the quarterly data, which has tracked performance metrics from January 2017 through June 2023, shows that overall sales across small businesses have declined for five consecutive months (measured on a year-over-year basis). However, in more positive news, payment times have improved for small businesses that invoice customers.
Small business sales are the weakest since 2020, despite signs of a strong overall economy
The most recent iteration of XSBI marked the weakest period for sales since mid-2020 when many small businesses were closed due to the pandemic.
- Small business sales fell 7.7% year-over-year (y/y) in June, after a 2.3% y/y decline in May and a 6.7% y/y decline in April.
- Sales growth has been slowing since mid-2021 and is now well below the pre-pandemic average of 5.9% y/y.
- Sales volumes have been even weaker than the nominal XSBI series. Using the US CPI as a proxy for prices, sales volumes declined an average of 7.2% y/y in the first quarter and declined an average of 9.5% y/y in the second quarter.
However, more broadly, the U.S. economy grew 2.5% y/y in Q2 2023 and continues to surprise most forecasters in its strength.
“The contrast between last quarter’s GDP growth and the latest XSBI sales results suggests that, to date, consumers and other businesses have not been prioritizing small businesses for their spending. It is great that consumers and businesses are still spending in the U.S. – but it's disappointing that small businesses have not gotten their share,” said Louise Southall, Economist at Xero. “The challenge now for small businesses is to work with their advisors on building loyalty among customers and finding ways to ensure buyers are spending with them, not larger businesses.”
Payment times showing early signs of improvement
Despite underwhelming sales results, data shows improvements in the average time small businesses are waiting to be paid by customers. This latest XSBI data demonstrated that June late-payment times were the shortest over the past 12 months.
- Small businesses waited an average of 27.6 days to be paid in the June quarter, down from 28.7 days in the three months to March. The June quarter result is only 0.3 days longer than the 2022 average (27.3 days).
- In June, invoices were paid to small businesses an average of 5.9 days late. This is three days shorter than the first five months of 2023.
- Late payments arrived an average of 7.7 days past due in the three months to June, which was 1.4 days shorter than the average for the three months to March (9.1 days). The June quarter result also is only 0.5 days longer than the 2022 average (7.2 days).
“While this improvement in payment times will certainly help with cash flow, being paid more than a work week late is still too long,” said Ben Richmond, CA, U.S. Country Manager at Xero. “Small businesses are typically seen as the backbone of our economy and employ a significant amount of the U.S. workforce. As we think about the best way to support small businesses in our communities, the onus falls onto all customers to pay their bills on time.”
Positive signs emerging for the rest of 2023
After what has been a tough period overall, some cautiously positive signs are emerging about how U.S. small businesses will perform for the rest of the year. In fact, the latest MetLife & U.S. Chamber of Commerce Small Business Index, an index that tracks small business owners' confidence, jumped six points in the September quarter, to 69.2. Further, the U.S. unemployment rate remains low, at just 3.8% in August which should support spending in the second half of the year.
Xero US | Diandra Binney | email@example.com
Xero is a global small business platform with 3.7 million subscribers which includes a core accounting solution, payroll, workforce management, expenses and projects. Xero also has an extensive ecosystem of connected apps and connections to banks and other financial institutions helping small businesses access a range of solutions from within Xero’s open platform to help them run their business and manage their finances. For four consecutive years (2020-2023) Xero was included in the Bloomberg Gender-Equality Index. In 2021 and 2022, Xero was included in the Dow Jones Sustainability Index (DJSI), powered by the S&P Global Corporate Sustainability Assessment. Xero is a FIFA Women’s Football partner.
About Xero Small Business Insights
The principal source of small business insights in this report is customer data from Xero - a small business platform that supports online accounting and a range of other applications. Xero is a responsible custodian of our customers' sensitive data and does not release any data that could identify individual businesses. The data used is aggregated and anonymized to ensure the privacy of Xero subscribers and their counterparts.
As part of the program, we publish regular blogs and research notes and deep-dive Special Reports on specific small business topics. These can all be found at xero.com/xerosbi.
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