In a recent article from New Zealand's Herald titled the ‘Worst months for small businesses’, some interesting 'late payment stats' arose from the release of Xero’s Small Business Insights Barometer across both New Zealand and Australia. The barometers aggregate data from hundreds of thousands of Xero subscribers in the small business category (across both countries).
Xero’s Small Business Insights barometer is updated monthly with the data covering the five major pillars including - cash flow, getting paid, hiring people, trading overseas and cloud adoption.
The statistics mentioned in the NZ Herald article included ‘the slowest months in 2017 for SME businesses getting paid on time as well as the (singular) best performing month for businesses getting paid on time. For many business owners the stats may not be surprising, and for others, it may shed some light on their lack of inbound cash flow over these periods.
Xero Small Business Insights show that over the March 2017-March 2018 period, 30-day invoices in New Zealand took an average of 34.7 days to be paid – with March 2017 (38.5 days) and May 2017 (36.4 days) being the worst (slow payment months) of the year. According to Xero's Small Business Insights on the Australian side of the Tasman (over the same period), May, October and January were the slowest months for getting paid on time.
According to the newly released insights by Xero, December 2017 was the best singular month for getting paid on time. This statistic was relevant to both sides of the Tasman. Craig Hudson, The Head of Xero’s New Zealand & Pacific Super Region commented that most people tend to sort out their finances before going on holiday so that they can enjoy their break without being chased for payment.
The flipside of the December result is the slowdown of payments in January… Many Australasian businesses reported slower payment time in January due to the delay in invoice payments, especially with people being on leave and the pressure of cash flow, etc.
Another interesting stat retrieved from both of the barometers including businesses who were cash flow positive versus businesses who were cash flow negative.
According to the small business insights dashboard in New Zealand – 53% of New Zealand small businesses were cash flow positive in April 2018. However, that’s still a gap of 47% of small business who are still struggling with a negative cash flow over the same period.
In Australia, this figure was relatively similar with 52% of Australian small businesses being cash flow positive in April 2018, whilst 48% were struggling with a negative cash flow over the same period.
Hudson says it is essential for small businesses to have a cash flow plan. Hiring a new staff member, buying new equipment or even securing a large contract is good for growth but can ultimately damage cash flow. He also alluded to the fact that businesses should have "A short-term business loan or invoice financing to provide the financial flexibility needed – and an unsecured business loan means no one needs to put their personal assets on the line.”
With all of this in mind, it’s important to have a plan. We’ve recently produced a resource, called 'It’s Your Money, So Don’t Play Bank'. This guide highlights 6 proven strategies to help you get paid faster, so you can enjoy a positive cash flow within your business.