In its June report, Xero found that the Australian index rose to 156 points in June, as payment times declined due to EOFY.
Xero’s Small Business Index for Australia rose 29 points to 156 points, the highest result ever recorded. The increase is largely due to a decline in the average time small businesses waited to be paid, which fell 3.5 days to 20.1 days. The big fall is likely off the back of the end of the financial year.
For the other metrics, wages and sales recorded a slowdown and jobs delivered the best result since November 2021.
Joseph Lyons, managing director Australia and Asia, Xero, said the time it takes for small businesses to get paid can massively impact cash flow, so it’s encouraging to see a drop in payment times: “Although this is a seasonal impact, there is still reason to be cautiously optimistic – after all, healthier cash flow 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 (y/y). All industries recorded positive sales growth, led by administrative services at +15.9 per cent y/y. This is a nominal measure of sales and includes both price and volume impacts. 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. But this shows that small businesses still sold more goods and services in June 2022, compared to the same period in 2021.
“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,” said Louise Southall, economist, Xero. “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 per cent 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. Continuing recent trends, 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,” said Ms Southall.
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 that began in January 2017. These improvements, while welcome, are most likely due to the end of the financial year and could be revised up in future months. For example, in June 2021 the initial report was for a 2.9-day decline to 20.1 days but this reading has since been revised up to 22.4 days.
