How to increase productivity in business | Xero NZ

Published Thursday 26 February 2026

Table of contents

• What is productivity?
• Why productivity matters
• Types of productivity
• How to increase productivity in your business
• Better work tools
• Automate repetitive tasks
• Improve your processes
• Develop your team
• Think strategically about growth
• Manage stress and prevent burnout
• Increase productivity checklist
• Start boosting productivity today
• FAQs on increasing productivity in business
• References

Key takeaways

• Automate repetitive administrative tasks like bank reconciliation, invoice reminders, and expense tracking to save up to 30% of your time and free your team for higher-value work that grows your business.
• Document your current work processes in writing, then identify bottlenecks like tasks being handled twice or jobs stalling at the same point, so you can redesign workflows to eliminate inefficiencies.
• Calculate the return on investment for productivity tools by listing potential investments, pricing each solution, and ranking them by expected ROI before making decisions with your accountant or bookkeeper.
• Create structured onboarding processes for new employees that cover systems access, hands-on training, and regular check-ins, as organisations with strong onboarding see productivity boosts exceeding 70%.

What is productivity?

Productivity measures how efficiently your business turns inputs into outputs. The more productive you are, the better you convert resources like labour, capital, or materials into products or services you can sell.

Why productivity matters

Productive businesses get more from less. This gives you more room to turn a profit, handle inflation or slowdowns, and absorb price competition.

After decades of continuously improving, productivity gains are getting harder to come by. For example, after a drop in 2022, labour productivity across OECD countries rebounded modestly to 0.6% in 2023. Many people typically think small businesses lag behind larger ones in productivity. Large firms tend to achieve higher labour productivity levels on average across OECD countries, although a recent Xero report is challenging some of these notions.

Types of productivity

There are three main types of productivity to track:

• Labour productivity: Shows how much work it takes to deliver products or services to customers, commonly expressed as hours worked per dollar earned
• Capital productivity: Shows how well your business monetises investments in assets like machinery, often measured as return on capital invested (which is also a profitability ratio)
• Materials productivity: Shows how much you spend on materials (inventory, energy) to generate sales

How to track productivity as it improves

When you measure productivity, you can see what's working and where to focus next. Without tracking, you're guessing.

Simple metrics to monitor:

• Revenue per employee: Total revenue divided by number of staff
• Time to complete key tasks: Track how long standard jobs take before and after changes
• Error rates: Count mistakes, do-overs, or customer complaints
• Cash collection time: How quickly invoices get paid

Review these metrics monthly or quarterly. Look for trends rather than obsessing over individual data points. Your accounting software can generate reports that track financial productivity automatically, showing revenue, costs, and profitability over time.

Set benchmarks based on your current performance, then set realistic goals to improve. Even small gains compound over time.

How to increase productivity in your business

There are four commonly accepted ways to increase productivity in your business:

• Better work tools: Invest in equipment and software that amplify output
• Smarter methods: Improve processes and eliminate waste
• Skilled workers: Develop your team's capabilities
• Entrepreneurship: Think strategically about growth opportunities

Better work tools

Better tools amplify the efforts of their users. A carpenter can do far more with an electric drill than a hand drill. The same principle applies to your business.

Sometimes it's as simple as software that cuts down double-handling of information. A booking system that schedules jobs straight into your calendar, or accounting software that integrates with payments or point of sale, can save hours each week.

Why you haven't invested in better tools yet

Upgrading work tools costs money. Marc Cowling, professor at Oxford Brookes University, investigated why small business owners don't (or can't) make that investment. Here are the top five reasons:

• Paralysed when prioritising: Small businesses have about six capital investment opportunities in mind at any one time, but can't back them all and don't know how to choose
• Unclear value: Relatively few small businesses run a financial analysis to estimate return on investment, so they struggle to justify making moves
• Risk aversion: Most small businesses will only consider investments they estimate will pay for themselves within two years, causing them to shy away from bigger projects with bigger potential impacts
• Loans rejected: Lenders have denied roughly a quarter of businesses a loan application, and after a knockback it takes up to four years before they apply again
• Perceiving it as complex: Many owners assume new equipment will be hard to learn, chew up training budgets, and clash with existing systems

How to choose and invest in productivity tools

Follow these steps to evaluate your tool investments:

1. List what you could invest in to improve productivity
2. Calculate what each would actually cost to implement
3. Work out the expected return on each thing you could invest in
4. Rank them by return on investment (ROI)
5. Work with your accountant or bookkeeper to find what makes the most sense

Automate repetitive tasks

Automation handles routine work so you can focus on growing your business. Research from McKinsey suggests that in 60% of occupations, automation could help workers save 30% of their time, freeing your team for higher-value work.

Common tasks worth automating:

• Bank reconciliation: Automatically match transactions instead of manual data entry
• Invoice reminders: Set up automatic payment reminders for overdue invoices
• Expense tracking: Capture receipts digitally and categorise expenses automatically
• Bill payments: Schedule recurring payments so you never miss a due date
• Payroll: Calculate wages, deductions, and pay slips without manual processing

To identify what you can automate, track how you spend your time for a week. Note every repetitive task that doesn't require your expertise. These are prime candidates for automation.

Accounting software with built-in automation features can eliminate hours of admin work each week. The time saved compounds quickly, giving you back days each month to focus on customers and strategy.

Improve your processes

Reviewing and revamping how you work can significantly improve your productivity. Many businesses develop a certain way of doing things, then never think about it again. Meanwhile, circumstances change and those original processes become less effective. Here's how to improve them:

Write down your processes

Record the steps you follow to complete jobs. Set aside time each week and get staff involved, as their perspective will be hugely valuable.

Use templated documents to capture the same information for all jobs. This helps everyone understand what to do, when, and how. The simple act of writing it down will also highlight inefficiencies and missing information.

Identify bottlenecks

Run through your documented processes looking for bottlenecks and roadblocks. Your employees will have great insights, so empower them to be honest. Mapping workflows visually can make problems more intuitive to spot.

Common inefficiencies to look for:

• Handled twice: Jobs being handed back and forth repeatedly
• Losing momentum: Jobs getting parked at the same point every time
• Poorly sequenced: Tasks getting done in an illogical order
• Quality issues: The same mistakes or customer complaints recurring
• Distracted: Low-value tasks pulling skilled workers away from important work

Redesign your workflow

Step through your list of inefficiencies and work out the kinks. You can often make big changes by:

• Clarifying roles: Make sure everyone knows their responsibilities
• Resequencing jobs: Put tasks in a more logical order
• Improving communication: Ensure people know where to find information they need

Consider outsourcing jobs you're not good at or excited by. External providers charge fees, but it may be money well spent if it makes your business more focused and efficient.

Adopt digital tools

Software can massively boost business efficiency. It helps you request and track jobs, centralise information, speed up communication, and automate unloved tasks. Yes, there's a learning curve, but on the other side you're free to focus on what you do best.

Consider software for:

• Invoicing and paying bills
• Managing inventory and staff
• Bookkeeping and reporting

Focus on what customers value

Focus your effort on things customers actually care about. You don't want to invest time and energy into work that doesn't move the dial for your business.

Try surveys or simple conversations with your customers to find out what matters most. If aspects of your offerings aren't resonating, consider investing less in them.

Develop your team

Big businesses hire specialists who are super-efficient at specific jobs. Small businesses tend to hire generalists who wear multiple hats. But you can still set them up to succeed.

Create an effective onboarding process

Structured onboarding gets new employees productive faster, with organisations that have a strong process seeing a productivity boost exceeding 70 percent. Without it, new hires take longer to contribute and make more mistakes along the way.

Essential elements of effective onboarding:

• First day: Cover basics like how to access systems, key contacts, and where to find information
• First week: Walk through core processes and tools with hands-on practice
• First month: Assign a mentor and schedule regular check-ins to answer questions
• First quarter: Review performance and adjust responsibilities as skills develop

Document your onboarding process so it's consistent for every new hire. Include login credentials, process guides, and answers to common questions.

For roles involving financial tasks, ensure new staff understand your accounting software from day one. Proper training prevents errors that cost time and money to fix later.

Provide ongoing training

Properly training and resourcing your people increases productivity. Set your team up for success by:

• Defining roles clearly: Give each employee a job description with clear responsibilities
• Documenting processes: Explain how jobs should be done and provide supporting materials
• Training on tools: Ensure employees know how to use all equipment and software, otherwise your capital investment is wasted
• Sharing the big picture: Regularly communicate business values and priorities so people can make the right decisions

Build a feedback culture

Feedback improves productivity, and it's a two-way street. When something's not done quite right, take time to explain the problem and the solution. Otherwise you'll get stuck redoing work. You want to delegate with confidence.

Listen to what your employees say too. They have different perspectives and expertise that can help you optimise how work gets done.

Follow these steps for effective feedback:

1. Ask employees what they did well, how, and why
2. Add to the positives by telling them what went well, with examples
3. Ask for their ideas on how to speed up or refine the work
4. Workshop those ideas together and, if appropriate, set new goals

Think strategically about growth

Entrepreneurship isn't just about launching a business; it's about optimising it. Entrepreneurs unlock productivity by better combining the resources at hand. This generally involves some risk-taking, but the rewards can be significant.

Strategic productivity improvements

Strategic moves that can boost productivity:

• Scale up: When you increase what you produce, you often lower the marginal cost of each product or service
• Acquire strategically: Buying or merging with another business can help you work more efficiently through complementary workflows, consolidated ways of operating, or improved ways of moving goods
• Specialise: Doubling down on a narrower niche can drive speed, expertise, and quality, so consider cutting services that don't earn much
• Rethink supply chains: Switching to suppliers that provide superior goods or complementary services can increase your productivity
• Hire entrepreneurial people: Foster a culture of innovation by empowering people who think like business owners

Manage stress and prevent burnout

Chronic stress kills productivity, with burnout costing businesses $322b annually because workers produce less. When you're overwhelmed, decision-making suffers, mistakes increase, and creative problem-solving disappears. Sustainable productivity requires managing your energy, not just your time.

Watch for these warning signs in yourself and your team:

• Constantly fatigued: Feeling exhausted even after rest
• Decreased quality: More mistakes and rework than usual
• Cynicism: Losing enthusiasm for work you used to enjoy
• Avoiding tasks: Procrastinating on important tasks

Practical steps to reduce stress:

• Automate admin tasks: Removing repetitive work eliminates a major source of frustration
• Set boundaries: Protect time for focused work and recovery
• Delegate effectively: Trust your team with responsibilities
• Streamline processes: Efficient workflows reduce daily friction

The productivity strategies in this guide, particularly automating tasks and improving processes, directly reduce stress by eliminating the chaos of manual work and unclear systems. When your business runs smoothly, you have mental space to think strategically.

Increase productivity checklist

Here are productivity-boosting steps to take in your business:

Better work tools

• List what you could invest in to improve productivity
• Price each solution
• Calculate the expected return on each thing you could invest in
• Make the move that offers the best mix of affordability and impact (consult your accountant or bookkeeper for greater certainty)

Improve your processes

• Write down and map out your work processes
• Identify all friction points (tasks handled twice, stall-outs, do-overs)
• Brainstorm ways to clarify roles, resequence how work flows, and fix how you communicate
• Consider software for admin tasks that distract from high-value work (or outsource them)
• Audit processes against customer preferences to ensure you're investing effort wisely

Develop your team

• Create an accurate job description for each role
• Explain how each part of the job gets done (in person and in writing)
• Provide comprehensive training on all tools
• Share the big vision of what the business stands for
• Meet regularly to give and receive feedback

Think strategically about growth

• Look for ways to scale up aspects of your work
• Stay alert to chances to acquire other businesses
• Consider specialising in a niche
• Keep evaluating your supply chain
• Surround yourself with entrepreneurial people

Start boosting productivity today

Small businesses can significantly improve productivity. Make it part of your mindset by continually examining and refining your processes, improving your work tools, and watching for inefficiencies that creep in. You'll need to invest in your team and technologies, but when done smartly, the benefits add up.

Efficient businesses are less likely to be delayed, confused, unable to communicate, distracted, or wasteful. When you become more productive, you often feel more satisfied too.

Ready to tackle one of the things that drains the most time for small businesses? Accounting software like Xero automates routine financial tasks like reconciling your bank, reminding customers about invoices, and tracking expenses, giving you back hours each week to focus on growing your business. Get one month free and see how much time you can save.

FAQs on increasing productivity in business

Here are answers to common questions about improving productivity in small businesses.

How long does it take to see productivity improvements?

Small changes like automating invoice reminders can produce results within days. Larger processes you improve typically take 2–3 months to fully implement and measure, though you'll often notice you're gaining early within weeks.

What's the best way to prioritise productivity improvements?

Start with changes that are low cost, quick to implement, and address your biggest time drains. Automating repetitive admin tasks often delivers the fastest return on investment (ROI) for small businesses.

How much should I invest in productivity tools?

A good rule of thumb is to calculate the cost of the problem first. If manual invoicing costs you five hours per week, that's worth more than a few dollars per month in software. Most small business tools cost $20–100 per month and pay for themselves quickly.

Can focusing too much on productivity hurt my business?

Yes, if it comes at the expense of quality, customer relationships, or employee wellbeing. Sustainable productivity is about working smarter, not just faster. Build in time for creative thinking, relationship building, and rest.

How is productivity different for service businesses vs. retail?

Service businesses typically focus on labour productivity (billable hours, how well they utilise staff), while retail businesses emphasise how quickly inventory turns over and sales per square metre. The core principles of better tools, smarter processes, and skilled workers apply to both.

References

OECD. (2023). Compendium of Productivity Indicators.

Professor Marc Cowling. (2024). Understanding small firms investment appraisal.

Professors Marc Cowling & Nick Wilson. (2024). The puzzle of underinvesting.