Xero data reveals small business sales show signs of recovery in 2024

Denver — July 25, 2024 —Xero, the global small business platform, today released new data which revealed that despite small business sales falling in the March quarter, they continue to improve year-over-year, with February seeing the first rise in sales in 13 months. Data also showed that average payment times improved slightly overall, but late payment times have worsened to almost 10 days late.

This was released as part of the Xero Small Business Insights (XSBI) program, which uses aggregated and anonymized data from tens of thousands of Xero small business subscribers in North America covering the past seven years (January 2017 through March 2024). XSBI also tracks sales and time to be paid for four of the US Census Bureau's major regions (West, Midwest, Northeast and South) to showcase the differing experiences of small businesses in each region.

February sales mark first positive growth in over a year, indicating improvement

There were constructive signs for small businesses at the start of the year, including February being the first positive month for sales since January 2023. A shrinking in sales declines indicates improvement may be on the horizon.

• Small business sales fell 1.8% y/y in the March quarter, smaller than the 2.4% y/y fall in the December 2023 quarter
• Sales growth showed improvement between December (-3.5% y/y), January (-2.1% y/y) and February (+1.3% y/y) – which was the first rise in sales in 13 months – before deteriorating in March (-4.7% y/y). This March fall is likely, in part, due to Good Friday, a holiday in some US states, being in March in 2024 instead of April
• Using the US CPI as a proxy for prices, sales volumes declined an average of 5.1% y/y in the March quarter after declining an average of 5.6% y/y in the December quarter
• At the regional level, in the March quarter, sales fell the most in the Northeast (-3.5% y/y), compared to -4.1% y/y in the December quarter; this was followed by the Midwest (-3.3% y/y), with the South (-1.7% y/y) and the West (-0.5% y/y) recording smaller falls than the national average

“In the March quarter, we saw the first positive month of sales growth in over a year, signaling a turning point for small business sales and reflecting an improving trend, following a long stretch of sales declines,” said Louise Southall, Economist at Xero. “Widely anticipated interest rate cuts by the Federal Reserve later this year, which would provide more spending power to customers, allowing them to better support local businesses, will hopefully fuel this already positive momentum and benefit small business sales.”

Average payment times improve, but late payments lengthen

Average payment times showed slight improvement, continuing the positive trend observed over the past year. However, late payment times worsened in the most recent data, with payments continuing to be made almost two working weeks late.

• Small businesses waited an average of 28.5 days to be paid in the March quarter, 0.2 days shorter than the December and September quarters (both 28.7 days) and 0.7 days shorter than in the June quarter (29.2 days); this improvement was particularly driven by January, when payment times dropped to 26.4 days
• Invoices took, on average, the longest to be paid in the Northeast (31.4 days), followed by 28.3 days in the South, 27.3 days in the Midwest and 27.2 days in the West; the March quarter results were better than the December quarter for the Midwest and the West but worsened in the Northeast and the South
• Small businesses were paid an average of 9.8 days late in the March quarter, which is 0.8 days longer than the December and September quarters (both 9.0 days) and 0.3 days longer than in the June quarter (9.5 days); the late payments data can be volatile and this quarterly deterioration was largely due to February, when payments were made 12.6 days late - this is the third-longest late payment time in the series

“Despite average payment times showing slight improvements, there was a notable increase in late payment durations throughout the March quarter, underscoring the ongoing challenges faced by small businesses,” said Ben Richmond, Managing Director, North America at Xero. “This further highlights the critical role of advisors in collaborating closely with small business clients to implement strategies that encourage prompt invoice payments. Offering initiatives such as diverse payment options, integrating ‘pay now’ features on invoices and sending timely customer reminders are crucial in helping reduce these extended wait times.”

To access the latest data, visit xero.com/xerosbi.

ENDS

Media Contact

Xero US | Diandra Binney | diandra.binney@xero.com

Methodology

Full details of the methodology used to construct the Xero Small Business Insights can be found here.

About Xero

Xero is a global small business platform with 4.2 million subscribers. Xero’s smart tools help small businesses and their advisors to manage core accounting functions like tax and bank reconciliation, and complete other important small business tasks like payroll and payments. Xero’s extensive ecosystem of connected apps and connections to banks and other financial institutions provide a range of solutions from within Xero’s open platform to help small businesses run their business and manage their finances more efficiently.