Xero has released a
Produced in partnership with Accenture, the report has been released in conjunction with
"The Xero program started because there is not a lot of data around small businesses, and the surveys are often small and irregular," said Xero economist Louise Southall. "We have real customer data from our platform to shine a light on what is happening in small businesses for policymakers, researchers or advisors."
The analysis focuses on several core performance metrics, including sales growth, the amount of time small businesses are waiting to be paid, and how late those payments are. The report found that, while small business growth seemed to be nearly double the pre-pandemic average, this was largely due to higher prices rather than an increase in the amount of goods and services sold. In short, it was likely due to inflation and small businesses increasing their prices to solve for market conditions.
Sales grew 11.3% in March, which is almost double the pre-pandemic average growth of 6.7%. However, inflation has also risen to 8.5%, which means real sales growth was a much slower 2.8%. Without price impacts, about three-quarters of the sales growth that month was due to higher prices rather than an increase in the amount of goods and services sold. In fact, 89% of small businesses have had to increase the price of their products or services since the pandemic began.
"In March 2022, the U.S. was experiencing higher inflation than any other major economy," said Chris O'Neill, chief growth officer at Xero. "As borrowing costs rise, expenses increase, and customer dollars decline in purchasing power, it is more important than ever that small businesses get control of their finances."
Delays in payments generally have an adverse effect on cash flow and liquidity, often causing smaller businesses to seek extensions and increase their borrowing; as such, payment times generally reflect how business cash flow is functioning. When invoices are paid late, it becomes harder for small businesses to pay their expenses on time as owners may need to borrow additional money or even use their own personal funds to support their business. Late payments reached an average of 5.6 days after averaging 7 days in 2021.
The report's insights did provide some better news for small businesses in terms of payment times and late payment delays for small businesses in the U.S. In March, small businesses waited an average of 23.5 days for invoices to be paid, which was quicker than the 2021 average of 25 days. However, O'Neill still encourages small business owners to keep cooperating with their financial advisor to ensure they are maintaining cash flow and profitability as inflation continues to grow.
"It's encouraging to see timely payments to U.S. small businesses; naturally, this helps support cash flow, which is the lifeblood of any business," he said . "This could be, at least in part, due to increased use of electronic invoicing processes and online payments as more small businesses embrace digital solutions."
Small businesses account for 99.9% of all businesses operating in the U.S., employing over 60 million people across the country and are responsible for nearly two-thirds of jobs created every year. Tim Felkner is one of them, and he co-founded Uncle Tim's Cocktails in Denver, Colorado, to respond to the increased demand for ready-to-drink cocktails during the pandemic. While his company managed not to increase its prices, Felkner had to reduce its inventory and negotiate better terms with its suppliers.
"I think the government should have actually limited that support money to small businesses in need," he said . "I think we have all heard about all the rich individuals and companies that received money that obviously didn't need it."
Business.org
