It’s not panic stations for small businesses
You don’t have to look too far in the media to hear business confidence is allegedly the lowest it’s been since the global financial crisis. The frustrating part of this commentary is its inaccuracy.
These conversations are being driven by the results of “business confidence surveys” which question feelings rather than facts. As a result, we end up dealing with perception rather than actuality.
Consider the small business sector which covers 97 per cent of our business population and 28 per cent of our GDP. Xero Small Business Insights data shows strong growth in employment per organisation, at 7.5-10 per cent. You don’t hire people if you are worried about your business or what is going to happen.
Skeptics will say we have reported a slowing in employment growth and that it is indicative of a turning of the tide. Yes, month-on-month hiring has slowed from May to June however, any sector that has been growing at the speed of the small business sector, will go through some small fluctuations. Bottom line, the small business sector is still growing at more than double the national average.
To judge business confidence, we should be looking at how long it takes to pay invoices and the cash flow of businesses. In an economic downturn, businesses start taking longer to pay suppliers and cash flow trends downward. According to our data, it took, on average, 8.3 days to pay an invoice in June. It is half a day quicker than it was in June 2017 (8.8 days) which means, overall, we are paying people more quickly, with no sign of the belt tightening we would expect in a downturn.
Likewise, June saw us sitting at 49.4 per cent of small businesses that are cash-flow positive. There is work to be done to improve this but it is in line with the average over the year of 50.4 per cent.
If we continue to take these business confidence surveys at face value, we run the risk of talking ourselves out of business happiness.
So, to those businesses who are worried about the conversations around them — try to consider the facts rather than opinions. We are in a far better position than “business confidence” will have you believe.
There is always work you can do to protect your business and it’s worth keeping this in mind, so you don’t grow complacent. Here are a few pointers.
We know that in the past financial year, on average, 50.4 per cent of small businesses were cash-flow positive in any given month. But when it takes people longer to pay their invoices, cash flow can become strained.
In June, payments were on average, 8.3 days late. For seven-day and 14-day invoices it was significantly worse. The resulting delay of more than a week can have a huge impact on cash flow.
It makes sense to stay on top of your accounts receivable. An easy way to keep payments coming in is to make the best use of online invoicing and features like invoice reminders. We know invoice reminders have a positive impact. In fact, in the first 25 days after payment is due, overdue invoices with reminders get paid an average of four days sooner than those without.
And consider an alternative payment type like Stripe or Paypal. Invoices paid via these platforms in conjunction with Xero are paid 10 days faster than other invoices.
Next, take a step back and look at your business’ online presence objectively. Identify areas you can improve to attract new and repeat business.
How effective is your website? Is it up-to-date? Is it mobile-friendly? Is it searchable? What results do you get if you Google your business name? Does your business have a Facebook page? If you sell goods or services, it’s worth considering whether an online store would be of benefit. For those who do have an online store, is it easy for customers to buy what you’re offering? How do you interact with your customers? Treating your customers well will increase your chances of repeat business.
Finally, chances are, unless you’re a bookkeeper or accountant, administration, accounts and business planning aren’t your strengths. That’s why it makes sense to bring someone on board who specialises in these aspects. Connecting with a trusted advisor will ensure your business runs smoothly.
A lot of small business owners can be reluctant to pay someone to look after the financial side. But the money you spend on an advisor is an investment you will see returns on. Not only can they look after accounts, payroll and other administrative tasks, their expertise means they’ll be able to identify areas in which you could be cutting costs or ways to increase your revenue.
It’s not always blue skies and sunshine when you’re running a business. But it’s not all doom and gloom either.
There are a lot of positives to draw on and we need to step out of this negative spiral and start paying more attention to what we know is true, not what we think is true.