The latest Xero Small Business Index report sees the index rise to 156 points, the highest result ever recorded.
Analysts say that the increase is due to a decline in the average time small businesses waited to be paid, which fell 3.5 days to 20.1 days. Another factor was small-business jobs growing at the highest rate delivered since November 2021, despite wages and sales were experiencing a slowdown during the latest reporting period.
“The time it takes for small businesses to get paid can massively impact cashflow, so it’s encouraging to see a drop in payment times,” Joseph Lyons, Managing Director of Xero in Australia and Asia, said. “Although this is a seasonal impact, there is still reason to be cautiously optimistic – after all, healthier cashflow equals stronger small-business performance. Despite inflation impacting Australian household spending, sales growth has continued at a double-digit pace.”
Despite customers facing cost of living pressures, sales have held up, rising a healthy 10.6 per cent year-on-year. There is also a positive sales growth noted across all industries, led by administrative services at +15.9 per cent y/y. However, when prices are taken into account, using the June quarter Consumer Price Index, the volume of sales rose a smaller 4.5 per cent y/y. Nevertheless, the report noted that small businesses still sold more goods and services in June 2022 compared to the same period in 2021. This was also a much better result than the experience of small businesses in the United Kingdom and New Zealand, where sales actually declined in the year to June once the impact of price increases was removed.
“The sales results show that Australian small businesses are continuing to sell more goods and services than they did a year ago, despite customers facing cost of living pressures,” Louise Southall, Xero Economist, said. “It’s a testament to how our small-business economy has continued to show resilience through the current inflation crisis.”
June recorded the strongest jobs result for 2022, increasing 2.0 per cent y/y, following a 0.2 percent y/y rise in May. Leading these results were administrative services (+6.9 per cent y/y) and professional services (+4.4 per cent y/y), echoing previous months where industries that facilitate working from home have been better able to grow jobs. Education and training (-1.9 per cent y/y), wholesale trade (-0.5 per cent y/y) and agriculture (-0.2 per cent y/y) were the three industries still recording declining jobs.
“The jobs result is hugely positive, and fantastic to see a rebuilding in recent months after a soft start to 2022,” Southall said.
The average time small businesses waited to be paid fell by 3.5 days in June to 20.1 days. There was also a 2.2-day decline in late payments to 4.7 days – which is a record low for this series which began in January 2017. While this can be seen as a positive development, the report tempered heightened expectations as these improved payment periods are most likely due to the end of the financial year and could be revised up in future months.