This month saw the inaugural Xero Small Business Insights Panel Tour 2018 take place in Adelaide, where more than 80 local accountants, bookkeepers and business advisers joined a select group of panel members to discuss the economic state of Adelaide small business.

Panel members:

Referencing Xero Small Business Insight’s state-based and national data from November and December 2017, panelists discussed how local late payment metrics, employment figures and cash flow trends impact the South Australian economy. Here are some highlights.

From your perspective what are the biggest challenges for small businesses in Adelaide?

Helen Ahrens: One of the biggest challenges we see is that South Australian businesses think too local. They think, ‘How can I sell in my suburb?’ or, ‘How can I sell in South Australia?’ instead of thinking, ‘How can I sell in a global market on a global scale?’

John Chapman: Local businesses often fall into the trap of looking only at the South Australian economy. There’s a border some 250 km from Adelaide – and it’s called Victoria! We encourage people to look at exporting. This approach helps drive constant diversification and modernisation of industries. There will always be someone else with a global mindset asking themselves, ‘How can I get into that area and deliver a better product or service?’

Martin Pike: We also need capacity to find new markets and grow our businesses, so one of the other big challenges for Adelaide businesses – particularly those in the regions – is to attract and retain good talent. We need to provide reasons for people to stay in South Australia, and I believe small business is the engine room of that vibrancy. As business owners, it’s our responsibility to hire good business leaders, and work to retain them as business grows.

Kerri Reynolds: The challenges facing local small businesses dictate the conversations we have with our clients. Those conversations focus firstly around cash flow and where business owners get funding. Secondly, it’s employees: how businesses can retain talent despite an expectation of wage increase in a market where price is decreasing or holding steady. For me, this all comes back to the question of how small businesses can innovate in different ways, in different markets.

We’ve seen it takes about 37 days for invoices with 30-day payments terms to be paid in the Adelaide Metro area in the past year.
That’s the third worst out of the 14 biggest metro areas we looked at across Australia. What’s your experience of Adelaide small businesses being paid slowly?

Lyn: We conducted a survey of 1000 small business from our client base last year and cash
flow was their top concern. We learned that clients depend heavily on email for debt collection
but getting on the phone early can make a big difference. That’s especially important when
you’re a business with all your eggs in one or two baskets and maintaining client relationships is

Kerri: Small business owners are passionate about their product or service, so the bandwidth to chase payments is not always high on their priority list – they’re busy chasing the dream instead. We encourage small business owners to initiate automated processes that effectively manage cash flow for them, and can help them get more comfortable with the mindset of asking for money.

Martin: As a tax, accounting, financial planning and business advisory firm, we see the pain of poor cash flow firsthand. There are three key things that businesses both large and small fail to realise:

  • Cash flow is a function of economic growth. If we can improve this, businesses can afford to grow. But if we can’t implement fast payment practices in South Australia, we only hinder our own economy.
  • Late payments tie up working capital in the business, which means the capitalisation cost of running a business becomes higher. In that sense too, we hurt ourselves and our small businesses by allowing a late payment culture to thrive.
  • The third, often forgotten element of this all, is the mental health impact of payment delays. Small business owners have a moral commitment to pay their suppliers but their hands are tied. That fact alone can keep people up at night. We have to address this at both a state and regulatory level.

John: Our office deals with B2B disputes under the Late Payment of Government Debts Act 2013. We know the construction industry, for example, can be prone to late payments – particularly if there’s a chain. If you have South Australian clients facing difficulty getting paid, we can help. We also advise small businesses owners to audit their processes, think seriously about who they do business with, decide their terms and conditions and them stick to them.

Rob: The Adelaide average of 37.32 days to get paid for a 30-day invoice is above the national average of 35.62 days – and that average is going the right way; it’s coming down. No one wants to be on the wrong side of a national average, but there is plenty of technology that South Australian business can leverage. Our data shows that you get paid 7 days faster when you attach a payment gateway to an invoice, for example. The more you can tighten these debtor days, the more working capital you free up to work on your own business.

Other topics and statistics on the agenda in Adelaide:

In November 2017, about 55% of Adelaide small businesses were cash-flow positive on average. That’s on par with the national figure. What can be done to improve that number?
What are the factors contributing to the 8.4% year on year growth in Adelaide, which is stronger than the average for metro areas nationally? Do you see this trend continuing?

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