Xero Small Business Insights (XSBI) showcases stability for Kiwi small businesses across a range of industries, from Transport and Retail to Agriculture and Education.

When it comes to measuring small business success, there is no metric that matters more to SME owners than cashflow. This measurement determines how well a business can generate and use cash efficiently, putting them in good financial health.

For this reason, cashflow continues to be one of the most important measures within XSBI. It enables our analysts to see the percentage of New Zealand small businesses that are cashflow positive each month, discover when cashflow is at its tightest and show when it’s at its most copious too.

Latest XSBI data revealed 55.3 percent of SMEs in New Zealand were cashflow positive in December 2018, down 0.48 percent from the same period the year before and down 1.24 percent from November 2018.

Despite this, overall, December was a strong month for small business cashflow. In the lead up to Christmas, we expected to see positive trends across the board as businesses posted their biggest sales of the year. Industry-wise Retail Trade and Accommodation, and Food services noted the highest cashflow numbers and, perhaps unsurprisingly, the end of the academic year saw Education and Training record their lowest numbers of the year.  

Historically, January is the worst time of year for small business owners to get paid, which inevitably affects cashflow during the post-Christmas crunch. Last January, invoices were paid 12 days late, 62 percent of invoices were overdue and only 38 percent of small businesses were cashflow positive. It’ll be interesting to see if we witness any surprises during our next release of data  and we’ll be looking out for anything that contradicts previous years.

What’s most fascinating about the industry data is the comparison of variability from 2016 to 2018. For many of the sectors variability was reduced, meaning that the number of cashflow positive businesses have essentially stopped being unpredictable and remain stable. This is particularly apparent in the Accommodation and Food sector which decreased in variability from 26 percent in 2016 to 19.5 percent in 2018 and Education and Training which was down from 40 percent to 33.8 percent.

The only sector that shows a sizeable rise in variability is Rental Hiring and Real Estate, increasing from 10.9 percent in 2016 to 14.9 percent in 2018. Although the variability has increased and the industry shows less stability than others, this sector still provides the highest proportion of cashflow businesses – sitting at a 51.5 percent average in 2018.

This article was prepared by Xero using 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.