Xero’s Small Business Insights represent a big step forward in the availability and potential use of information to add value and provide intelligent customer insights on small business trends.

It harnesses the collective financial information of a big chunk of the New Zealand economy.

The modern and increasingly digitised world needs sound information and data-analysis to assist in providing quality solutions. Accuracy is paramount if intelligent customer insights are to be delivered.

Lots of people talk about using data to add insight. Few actually do it. Often the data is simply not extensive enough to make the insights reliable. Data by itself is useless unless you translate it into something meaningful. Data needs to be brought to life.

Data can help improve the customer’s digital experience and deliver insights on potential economic trends, identify timely issues and help benchmark performance.

It will give policymakers a greater understanding of small businesses. Small businesses represent around 97% of all businesses and account for close to 30% of total employment. Despite their scale and importance, data on the performance of small firms is limited.

Over time, Xero Small Business Insights has the potential to be one of the most powerful gauges of economic and financial trends across the New Zealand economy.

Let’s consider some examples on how the information could be used.

Managing cash flow can be a major challenge for small-to-medium sized businesses.  It can be volatile from month to month. Xero Small Business Insights data shows that a key driver of movement in cash-flow is variability in getting paid.  When customers take more take time to pay, pressure on cash-flow mounts.

Anywhere from 40-60% of accounts which are on a 30-day payment term get paid after 30 days.  That’s a lot of arrears.

When lots of firms slow up payment, the wheels across the economy turn slower.

So, what are some key insights?

Xero can look at ways of using technology and their systems to help firms get paid quicker.  The message for businesses is to stay on top of your accounts receivable. Firms could consider shortening payment terms and being more proactive making sure arrears remain contained. Service providers such as banks can look at the aggregated data and get insight into how they can better assist with smoothing cash-flow via lending arrangements.

The months of January, May and August are the tough cash-flow months for businesses, and yes that coincides with when provisional tax is due.  So, there are insights for policymakers over how to think about helping businesses smooth cash-flow.

Employment across small-to-medium sized businesses has been booming. Annual growth has been around 8-10% for the past year. That’s well above the national growth employment figures of around 3%.

It’s not been driven by growth in the number of small enterprises. Growth in the number of employees per firm (think headcount per organisation) has been chugging along at a hefty 8%. Small businesses are growing – rapidly.

With small businesses growing that fast, the pool of available workers is naturally disappearing. We need the migrants, and we need the education system to be aligned to the skills required and demand coming out of various sectors.

This article, including the insights and analysis contained within it, was prepared by Economist, Cameron Bagrie with the support of Xero through Xero Small Business Insights data. For the purpose of informing and developing policies to promote small business in New Zealand. It contains general information only and should not be taken as taxation, financial, investment or legal advice. Xero recommends that readers always obtain specific and detailed professional advice about any business decisions.

Download the Xero Small Business Insights summary here

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