Xero Data Shows Main Street Recovery Remains Uneven Across the U.S.

San Mateo, California — July 30, 2026 —Xero, the global small business platform, today released new state-level data from Xero Small Business Insights (XSBI), revealing significant regional differences in small business performance as national sales continue to improve. While U.S. small business sales grew for a second consecutive quarter, businesses also waited longer to be paid, highlighting continued pressure on cash flow despite improving economic conditions.

Based on aggregated and anonymized data from more than 32,000 U.S. small businesses, the report provides a localized view of how economic conditions are affecting businesses across 18 state and regional groupings.

Sales improve, but growth remains uneven

Small business sales grew 4.0% year-over-year (y/y) during the June quarter, marking a second consecutive quarter of improvement. While up from 2.1% y/y in the December quarter and 3.5% y/y in the March quarter, growth remained below the long-term average of 5.4% y/y. Monthly trends suggest elevated fuel prices and broader household cost pressures weighed on discretionary spending, with sales slowing from 5.2% in March to 2.6% in May before rebounding to 4.8% in June as fuel prices eased.

"The headline economy and the small business economy are increasingly telling different stories," said Louise Southall, Economist at Xero. "While AI investment is helping drive broader economic growth, many small businesses continue to face higher costs, cautious consumer spending and tighter cash flow. That's why operational data like sales and payment trends provides a clearer view of conditions on Main Street.”

Payment trends reflected those pressures. While late payments improved by 0.5 days to 8.5 days, businesses waited longer to be paid overall, with the average payment time increasing from 28.6 days in the March quarter to 29.3 days in the June quarter. The data suggests businesses may have extended invoice payment terms, delaying when cash ultimately reached small businesses.

“For small business owners, the truest economic indicator isn’t a headline about the economy, it’s the state of their cash flow,” said Matan Bar, CEO, Xero U.S. "This quarter’s insights tells us that sales are improving, but many businesses are still contending with longer payment terms, rising costs and uneven conditions nationwide. That's why Xero continues to innovate, giving customers more ways to achieve real-time visibility into their cash flow, and why we encourage them to lean on their advisors to make smarter, more confident decisions as conditions shift."

State-level data reveals significant regional differences

For the first time, XSBI includes state-level sales and payment data, providing a new view into how economic conditions vary across the country and revealing substantial differences in small business performance across the country.

During the June quarter:

• Maryland, Virginia and Washington, D.C. recorded the strongest sales growth at 7.8% y/y
• New York followed at 7.6% y/y
• Delaware recorded 7.1% y/y growth
• Utah recorded the weakest result, with sales declining 4.5% y/y.
• Washington (0.3% y/y) and Ohio (0.7% y/y) posted the slowest positive growth

Payment performance also varied considerably between states. California businesses received payment in 25 days, nearly 12 days faster than businesses in Texas (36.9 days), illustrating how payment practices and operating conditions can vary significantly across states.

Looking ahead: uncertainity continues

Looking ahead, ongoing geopolitical uncertainty, elevated gasoline and other input costs, and cautious consumer spending are expected to continue weighing on small business profitability through the remainder of 2026. While accelerated AI-related investment is supporting broader U.S. economic growth, much of that investment is occurring among larger businesses, leaving small businesses more exposed to softer household demand and continued pressure on margins and cash flow.

To access the latest data, visit the XSBI website.

ENDS

Media Contact

Xero US | Rola Tfaili | rola.tfaili@xero.com

About Xero

Xero is a global small business platform that helps customers supercharge their business by bringing together the most important small business tools, including accounting, payroll and payments—on one platform. Xero's powerful platform helps customers automate routine tasks, get timely insights, and connect them with their data, their apps, and their accountant or bookkeeper so they can focus on what really matters. Trusted by millions of small businesses and accountants and bookkeepers globally, Xero makes life better for people in small business, their advisors, and communities around the world. For further information, please visit xero.com.

About Xero Small Business Insights

The aim of Xero Small Business Insights is to create insights to help inform decision makers in support of the small business economy as a whole. 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 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, Xero publishes regular blogs, research notes and special reports covering small business trends. These can be found at xero.com/xerosbi.