Aussie SMEs faring better than international competitors, Xero data reveals
Australian SMEs are continuing to outperform small businesses in other countries despite challenging macroeconomic conditions, according to recent Xero data.
Xero’s recent Small Business Insights (XSBI) update highlighted that Australian small businesses have persevered in the challenging economic environment, placing them ahead of international competitors.
The Small Business Insights update also revealed a slowing in Australian SME sales growth despite being better placed than other countries.
Sales growth averaged 3.7 per cent year on year for the September quarter, which was only half the long-term average growth rate for the series, according to Xero.
Despite this, Australian SMEs had tracked better than other economies followed by the XSBI. The US, New Zealand and Canada all recorded negative sales growth in the last quarter.
It was noted that Australia was one of the most effective economies at managing wage cost pressures and recorded the highest proportion of small businesses creating jobs and the shortest payment times.
Xero economist Louise Southall said small businesses were showing continued adaptability despite the economic headwinds.
“Sales improved in July after experiencing negative growth in June, but this could have been an immediate response to the income tax cuts that started on 1 July, where Australians had more disposable income to spend with small businesses,” Southall said.
“It’s also an encouraging sign that small businesses still have the means to hire more staff, however, the smaller rise in sales this quarter raises questions around how long small businesses can sustain this while managing cashflow pressures.”
According to the XSBI, jobs growth remained strong particularly in August and September, rising 5 per cent and 5.8 per cent year on year.
A noticeable variation in jobs growth across the industries and regions was noted, with job gain being led by public administration and healthcare as they were underpinned by public sector spending.
The XSBI reflected a continued decline in hospitality jobs and was the only industry employing fewer staff than a year ago for the fifth year in a row.
Western Australia was revealed as the state to show continued jobs growth, with a 6.7 per cent increase year on year. This was followed by Queensland and South Australia, while Tasmania recorded the weakest.
Wages growth remained steady at 2.9 per cent year on year, recording a small uptick from 2.8 per cent in the three months to June.
Xero said this suggested small businesses continued to pay smaller wage increases than the national average, which for the year to June was 4.1 per cent.
In the September quarter, payment times showed a small increase as payments were made an average of 6.1 days late, up from 6.0 days in the June quarter.
Small businesses waited an average of 22.1 days to be paid, up from 21.7 days in the June quarter.
Xero said this could be attributed to an “abnormally low” June quarter result with businesses settling their accounts ahead of the end of the financial year.
Xero sales director Australia, Theo Konstantas, said it was encouraging to see Australian small businesses continue to weather challenging conditions, and fare reasonably well compared to other markets.
“The slight increase in how long small businesses are waiting to be paid serves as a good reminder for small businesses to think about cash flow and consider offering more ways for their customers to pay.”
“This might include bolstering digital payment methods or using automated invoice reminders, which getting on top of is crucial for many industries as we come to the end of the year and holiday season.”
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