Kiwi small businesses paid on average 8.3 days late in June
Xero Small Business Insights highlights late payments as a key issue for small business in NZ
AUCKLAND, 14 AUGUST 2018 — Xero, the global small business platform, today announced an updated data metric for Xero Small Business Insights (XSBI), providing a more comprehensive overview of payment trends for small businesses in New Zealand.
The ‘getting paid’ metric was previously calculated using invoices with 30 day invoice terms. Now, the metric has been expanded to include all invoices for NZ small businesses processed through the Xero platform regardless of invoice terms. All XSBI data metrics are based on anonymised, aggregated data from hundreds of thousands of NZ Xero subscribers.
As a result, Xero Small Business Insights shows that NZ small businesses using the Xero platform were paid on average 8.3 days late in June 2018. When broken down into the most common payment terms it shows that invoices with seven day payment terms were paid 10.3 days late, 14 day payment terms were paid 8.2 days late, 20 day terms were paid 9.5 days late and 30 day terms were paid 3.1 days late. Interestingly businesses whose payment terms were longer (60 - 90 days) were more likely to be met either within the specified period or earlier.
Xero New Zealand Managing Director, Craig Hudson, believes the updated metric shows that as a country, late invoice payment is an issue for Kiwis.
“The biggest impact we could have on the success of small businesses in New Zealand is to improve our payment practices to increase cash flow. Eight days late for one invoice has the power to cripple a small business, let alone what it will do to them if every invoice is paid eight days late. For those small businesses with seven day payment terms it means they are waiting more than double the term for payment and that’s not good enough.
We are in a better position than our Australian and UK counterparts when it comes to late payments, both of which have had Governments step in to try and regulate the payments process. I’d like to think that we aren’t at that stage yet, but if we don’t do anything to reduce this 8.3 number then the small business sector - comprised of 97 percent of our workforce and the driving force behind our economy - will continue to be suffer.
Cameron Bagrie, Economist, says getting paid and cash flow are key economic indicators as they represent what is happening on the ground.
“From an economic standpoint, downturns are associated with pressures on cash flow and delays in getting paid. When a downturn hits, everything slows as less business is done, people take longer to pay and cash flow pressures mount.
Xero’s Small Business Insights data challenges the notion that the economy is in a downturn.
The trend in getting paid is one of improvement across four of five payment terms. The average invoice is overdue by 8.3 days which is down on a year ago (8.8 days). Every small nudge in the right direction helps, however, more work could clearly be done!”
Key data points from Xero Small Business Insights includes:
• In June 2018, small businesses using Xero were paid on average 8.3 days late.
o Invoices with seven day payment terms were paid on average 10.4 days late in June
o Invoices with 14 day payment terms were paid on average 8.2 days late in June
o Invoices with 20 day payment terms were paid on average 9.5 days late in June
o Invoices with 30 day payment terms were paid on average 3.1 days late in June
• When considering invoices with 30 day payment terms, the best months to get paid were December 2017 (32.4) and June 2018 (33.1). Whereas the worst months to get paid over the past year were August 2017 and February 2018 at 35.9 days and 36 respectively
• In June 2018, 49.4 percent of Kiwi small businesses were cash flow positive
• Over the past year (from June 2017 to June 2018), on average, 50.46 percent of New Zealand small businesses were cash flow positive in any given month.
• The best months for cash flow positivity were November 2017, December 2017 and March 2018 hovering around 55-56 percent. The worst months were August 2017 (41%) and January 2018 (38%)
• From May 2018 to June 2018, there was an overall decrease in the number of Kiwi small business employees - down 1.3 percent
• The construction industry saw a 1.8 percent reduction in June 2018, almost a complete reversal of the May 2018 increase of 2.0 percent
• The retail industry also followed the overall trend, with a 2.9 reduction in June 2018.
• From May 2018 to June 2018, the change in the total dollar value of imports and exports for New Zealand small businesses was a decrease of 7.5 percent.
Xero Small Business Insights serves to deepen the understanding of New Zealand’s small business economy. Updated monthly, the data covers five major pillars - cash flow, getting paid, hiring people, trading overseas and cloud adoption. It is based on anonymised and aggregated data drawn from more than 300,000 New Zealand subscribers using Xero.
For more information visit Xero Small Business Insights at https://www.xero.com/nz/small-business-insights
Xero is a beautiful, easy-to-use global online platform for small businesses and their advisors. The company has 1.4 million subscribers in more than 180 countries. Xero seamlessly integrates with more than 600 apps. It was ranked No. 1 by Forbes as the World's Most Innovative Growth Company for two years running, won Product of the Year at the British Accountancy Awards 2017 in the UK, and was rated by Canstar Blue as Australia’s best accounting software three consecutive years from 2015-2017.
About Xero Small Business Insights
This media release 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.