Late payments stall small-business recovery

late client payments, cash, law, customers, payment time

The amount of time small businesses spent waiting for their invoices to be paid stretched out to 23.4 days in the month of April, creating a cashflow problem that negated improvements in jobs growth and sales in seeing the small-business performance overall dip since the first quarter of 2021.

The Australian Small Business Index, part of Xero Small Business Insights, reveals that small businesses’ invoices were settled 6.9 days after their due date on average, the latest average payment time since October 2020.

Although this issue saw the overall performance of small businesses decline in April, performance of the sector is still around historically high levels – the Index was above 100 for the fourth consecutive month, indicating that small businesses are well on the road to economic recovery after the ravages of the pandemic.

Job growth remains strong, despite end of JobKeeper in March, with growth averaged out over a two-year period increasing to 5.1 per cent in April from 5.0 per cent in March, these numbers resulting in an overall increase in the number of jobs in the small-business sector since December 2019 of 3.0 per cent year-on-year.

Similarly, small-business sales revenue improved again, resulting in a 4.4 per cent year-on-year increase in this metric. This revenue growth was recorded across all industries, including those hardest hit by COVID – hospitality, arts and recreation.

And, despite the ongoing issues of snap lockdowns and uncertainty brought about by new COVID clusters appearing from time to time, wages in small business grew at a higher level than inflation – averaged out the wage increase in the sector in April was 2.5 per cent year-on-year.