What does the data from the first quarter of FY2020 say about business performance in Aotearoa? 

When looking over the quarterly Xero Small Business Insights (XSBI) the most striking statistic that jumps out at me is that by the end of Q1 small businesses were getting paid just 7.65 days late. This is down 1.13 days from April 2019. Comparing the data to FY2019 it shows that SMEs are getting paid on average 0.7 days faster, which is a really solid year-on-year improvement. 

Looking even deeper into the stats I see that the average number of days it takes to get paid over the last 12 months is 8.7. This is the first time the 12 month average has been under nine days which is again, a really promising sign. 

It shows that business performance is going well in Aotearoa. When times are tough businesses hold onto their cash as long as possible which slows down the economy and drives some companies to ruin. That’s not happening here - in fact - it’s the opposite. Imagine what small Kiwi businesses could achieve if no payments were made late. 

Another key indicator of the small business sector’s health is the percentage of cash flow positive companies across the country. 

During the first quarter, cash flow positivity fluctuated with an overall drop of 2.87 percent from April (52.15%) to June (49.28%). However, this is an expected seasonal change and we anticipate seeing this figure increase during the next quarter, as it did in 2018. Comparing June 2019 to June 2018, we’re only 0.08 percent down, so we’re currently following the trends of previous successful years. 

Ultimately, this figure tends to be higher at the end of the financial year as people close out their accounts. In fact, in March this year we saw a record high percentage of cash flow positive businesses with 57 percent reporting positive results. 

These are the same trends we saw in 2018, highlighting an annual course that happens at the beginning of each new financial year as businesses get their affairs in order and settle their accounts for the previous financial year. 

We’ll be looking closely at the XSBI data in the second quarter to ensure things pick up in line with our expectations. 

One confronting takeaway from this quarter is the significant drop in hiring, which fell by 4.75 percent. When looking deeper into the raw results, we are able to see that there has been a slowing in the annual percentage change in new employees per organisation. 

This could be a sign that there has been a slowing of employment for small businesses, however, through our analysis we have determined it is more likely to be a case of the talent shortage becoming more apparent in New Zealand. Only time will tell and we will be able to better understand the data when we have the full 2019 insights to review. 

So, how is Kiwi small business performing after the first quarter of FY2020? Overall, it’s going well and I’ve got a very positive outlook for the rest of the year. Some surveys indicate business confidence is low, but these are opinion based and ineffectual because they aren’t backed by hard business data from the real world. 

This is what makes XSBI so useful - it’s a true representation of the sector based on anonymised and aggregated activity through the Xero platform. The small business community should be confident seeing that late payments are improving and cash flow positive statistics are following the trends of the successful FY2019.

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.