But despite the uptick, small businesses are now waiting longer for invoices to be paid.
The Xero Small Business Index rose seven points in August to 119 points, and Joseph Lyons, managing director of APAC at Xero, said the result demonstrates that small businesses are successfully navigating a period of increasing inflation and cost-of-living pressures.
“It’s also encouraging to see post-pandemic recovery for the hospitality and arts and recreation industries — two industries that were the hardest hit over the last couple of years,” he said.
The number of jobs available in August rose 6.6 per cent year-on-year, which indicates small businesses are hiring new staff. It was the strongest jobs growth since August 2021.
“The Index has revealed four consecutive months of positive jobs growth, which is promising to see in such a tight labour market. It is a strong indication of the strength, resilience and health of small businesses across the nation,” said Mr Lyons.
All states and territories recorded positive jobs growth with NSW leading the way (+13.6 per cent y/y). Agriculture was the only industry to report a negative jobs result (-0.8 per cent y/y), with all other industries reporting positive growth. In particular, arts and recreation (+18.9 per cent y/y) and hospitality (+14.4 per cent y/y) led the pack.
Wages rose 4.1 per cent y/y in August, the second-highest result since the series began in January 2017. Wages growth was led by construction (+4.7 per cent y/y) and manufacturing (+4.5 per cent y/y), with healthcare (+3.1 per cent y/y) recording the slowest growth.
“Wage increases can be simultaneously positive and negative for small businesses. Whilst faster wage increases add to running costs, higher wages also reflect the underlying health of the small business sector, as well as its capacity to compete for staff against larger organisations,” said Louise Southall, economist at Xero.
“Paying higher wages also supports employees as they navigate their own cost of living pressures and in turn, allows them to spend more with small businesses.”
Sales rose 16.3 per cent in August — the largest rise since February 2022. Similar to jobs, Australia’s sales results were led by arts and recreation (+47.1 per cent y/y) and hospitality (+41.3 per cent y/y) — two industries that struggled the most during the pandemic period.
“The rise in sales isn’t solely due to higher prices, it also reflects more goods and services being sold. Based on the most recent Consumer Price Index (June 2022) of 6.1 per cent y/y we can see nominal sales are growing faster than inflation,” said Ms Southall.
The one negative outcome in August was the average time to be paid that increased 0.5 days to 23.6 days. This is the highest reading since August 2021, and above the 22.8-day average for the first six months of 2022.
