The number one problem for small businesses in New Zealand and Australia is getting people to pay them on time.

The cashflow crisis created by slow payers sends more small businesses to the wall than the myriad other challenges they face.

Xero, the small business accounting platform, estimates New Zealand’s small businesses are owed more than $7 billion in overdue payments.

At least 50 percent of them are owed $7000 on any given day. For Australian small businesses, the average amount outstanding is $19,000.

Australian Small Business and Family Enterprise Ombudsman Kate Carnell has said half the small business owners in Australia aren’t making a living wage.

“Fifty percent of small business owners have a taxable income less than the minimum wage,” she said. “That means for an awful lot of small businesses their flexibility is very low, the amount of money to handle new regulation or new requirements is very low.”

Helping small businesses predict and improve their cashflow was high on the list of topics at Xero’s annual shindig for accountants and book keepers from New Zealand, Australian and Asia.

Held last week in Brisbane, Xerocon, which is often dubbed the “Coachella for Accountants” drew more than 3,000 disciples of the online accounting software company.

The same day as they flooded into the massive Brisbane conference centre to hear about the company’s latest product innovations, respected business analyst Robert Gottliebsen wrote a powerful commentary in The Australian newspaper.

Gottliebsen put forward the idea that the best way to kickstart Australia’s slowing economy was to get big companies to pay small companies on time.

He pointed out Prime Minster Scott Morrison had campaigned on the issue at last year’s federal election, claiming quicker payments would transform Australia’s economic outlook.

Morrison said at the time: “What really makes small business light up is when they get paid and when they get paid on time. If you don’t pay them on time it slows the whole show down. In the economy money has got to move. If you slow its movement down, it slows everything down.”

Morrison’s Government is planning a “name and shame” campaign as part of its policy to get Australia’s 3000 largest businesses to pay on time.

Companies with a turnover of $100 million or more will be required to publish their payment information. Companies that don’t “play fair” won’t be able to bid for government contracts.

Gottliebsen urged Morrison to hurry and implement the measures before the Australian economy slows down any further.

So what about New Zealand? Will our Government follow Australia and give slow-paying corporates a kick where it hurts?

Xero’s chief product officer, Anna Curzon is a member of Prime Minister’s Business Advisory Council chaired by Air New Zealand CEO Christopher Luxon.

She says the council is concerned about cash flow issues facing small businesses but favours a more subtle approach for New Zealand.

“Part of it is just getting out and making big business aware, getting out and shining a light on the issue. When we talk to big business and say come with us on this, they all say ‘yes we will come with you’. The Prime Minister is very supportive of this approach.”

Curzon says Xero recognises small businesses need better information on their cashflow and the company has been trialling a new feature on its platform.

“The problem is, up until now it’s been difficult to get an up-to-date view of cashflow in Xero without visiting several areas of the product and doing some manual calculations via a spreadsheet.

“This solution may be fine for occasional advanced planning, but what about when you just want to know ‘can I pay my bills and staff this month and still be okay?’ Cashflow is personal, emotional and can keep you up at night. We’re hoping this new short-term cashflow feature will help you (small business owners) sleep easier.”

The new feature visually projects the user’s bank balance 30 days into the future, showing the impact of existing bills and invoices that are paid on due dates.

Businesses can also see the impact of paying a bill today versus next week, and know which overdue payments they should immediately chase up.

“We’re in pilot phase right now because we’re only at the beginning of the functionality we’d like to build. In fact, we’re actively seeking small businesses interested in trying the feature and giving us feedback before the official launch in early 2020.”

Xero is also working with payment service companies like Stripe to make it easier for customers to pay on time. Small businesses can now send electronic invoices that include a big red “pay now” button.

Does it speed up payment?

“Yes, categorically it does. If businesses have online payment services set up and integrated into their invoicing, our data shows they get paid 14 days faster than people that don’t have that set up.”

Xero’s New Zealand managing director, Craig Hudson, says speeding up payments to small businesses, which make up 97 percent of the business sector, would have a significant impact on the New Zealand economy.

“This is a huge economic deficit that, if we can rectify, would pour billions back into local communities. On average half the overdue invoices were at least 16 days past their due date and still pending payment.

“Small businesses need this money to pay suppliers, staff, rent and other bills – and over time that can take a toll.“

Mark Jennings is co-editor of Newsroom.

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