Small business economic performance highlights stability

Small business economic performance highlights underlying stability

Auckland, New Zealand – 2 December, 2019 – Xero, the global small business platform, says invoice numbers have rebounded for Kiwi small businesses, indicating underlying stability within the New Zealand small business economy.

New Zealand’s small business sector represents approximately 30 percent of New Zealand’s GDP and Xero’s assessment of the small business economy is based on Xero Small Business Insights (XSBI). This is an anonymous and aggregated data set of actual business behaviour drawn from a sample of Xero’s 367,000 Kiwi subscribers.

Cameron Bagrie, an independent economist, says Xero’s data provides insight into what Kiwi small businesses are actually experiencing and indicates solidity in the small business economy.

“Cash is king for businesses. So, sustained year-on-year dips in cashflow or an increase in invoices being paid late would be a concern. However, cashflow and late invoice payment have essentially held or improved during 2019, compared to 2018.

“Where we have seen preliminary teetering is in the volume of invoices being issued this year. This is a valuable indicator because when businesses send less invoices, they are likely to start sensing a financial slow up. It’s a sign of softening growth.

“In June and August 2019, small businesses sent out less invoices than in the same months during 2018. But the most recent data shows this figure has rebounded back to positive year-on-year growth. That fits with a raft of data that shows slowing activity into the September quarter but a rebound towards the end.”

Bagrie concludes he will be keeping a close eye on whether the number of invoices coming from small businesses continues to go in the right direction. “Invoicing is a key common-sense gauge of economic momentum.”

David Bell, Xero’s Director, Business Growth in New Zealand, says it’s important to look at actual small business behaviour when understanding economic performance, rather than business confidence data.

“Commentary may paint a sense of doom and gloom, but things like business confidence questions are a hopeless indicator of the economy. It only captures what businesses think or perceive to be happening, not how they are actually performing.

“It’s important we don’t talk ourselves into an economic downturn and we acknowledge the strength showing through. We need to analyse actual data to understand this. It’s far more valuable to know how fast businesses are being paid, if they are cash flow positive and the volume of invoices being issued,” says Bell.

On any given day more than 50 percent of New Zealand small business customers on the Xero platform are owed at least $7,000.

“Keeping money moving efficiently around the small business economy is vital and one of the most important things we can do to support New Zealand’s economy. So, its important businesses keep paying their invoices on time – particularly as we head into the holiday and New Year period,” Bell concludes.

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