New data spells out when NZ’s vital small businesses can struggle most.

If you know someone running a small business, or even working in one, be extra kind to them in January, March and May.

That’s because they seem to be the most difficult months for small businesses when it comes to getting paid or having a positive cash flow.

That’s a major finding from the first Xero Small Business Insights – an ongoing barometer, launched this month, of about 300,000 small business subscribers in New Zealand whose relationship with the cloud-based software accounting firm provides an authoritative window into the life and times of such businesses.*

It’s an important look through that window for New Zealand as a whole. Small to medium enterprises (SMEs) are a major plank of the New Zealand economy: 97 per cent of all businesses have 20 employees or less, they provide jobs for roughly a third of all Kiwis and produce about 29 per cent of our GDP.

Yet there are a number of problems facing small businesses, including cash flow and the regrettable effects of not being paid on time.

Xero Small Business Insights show that over the March 2017-March 2018 period, 30-day invoices in New Zealand took an average of 34.7 days to be paid – with March 2017 (38.5 days) and May 2017 (36.4 days) the worst months last year.

In comparison, December 2017 was the best month for being paid – with Craig Hudson, Xero NZ country manager saying: “We can probably thank the Christmas break and summer holidays for that – people are almost certainly sorting out their finances before going on holiday so they can enjoy their break.”

But if December is a good time, January cash flow can be difficult. In an allied look into the cash flow situation of small businesses, Xero Small Business Insights showed that, in a 13-month period, January 2018 was the weakest month with only 38.6 per cent of New Zealand small businesses being cash-flow positive.

May was also tight (only 41 per cent were cash flow positive) as was August (41.2 per cent).

“The January low is a likely reflection of delays in invoice payments over the summer holidays,” says Hudson. “But the data shows the great degree of variability small businesses experience throughout the year – dipping in and out of positive cash flow.

“Such peaks and troughs can be symptomatic of the seasonal nature of many small businesses but 2017 also saw that variability at a macro level in terms of the economy.

Meanwhile, late payments affect small businesses more – as they have fewer reserves to sustain themselves while waiting to be paid.”

The flow-on effect of late payments and inconsistent cash flow sees the receiving business having to extend its own payment cycle if the paying company does not conform to common credit terms like paying on the 20th of the following month.

That can lead to greater costs as overdrafts and other financing arrangements are activated – incurring interest payments, not to mention stress for the business owner.

Hudson says it is essential for small businesses to have a cash flow plan. Hiring a new staff member, buying new equipment or even securing a large contract are good for growth but can damage cash flow.

“A short-term business loan or invoice financing can provide the financial flexibility needed – and an unsecured business loan means no one needs to put their personal assets on the line. Within 24 hours, small business owners can capitalise on opportunities without affecting their cash situation.”

*Updated monthly, the data covers five major pillars – cash flow, getting paid, hiring people, trading overseas and cloud adoption. It is based on anonymised and aggregated data drawn from more than 300,000 New Zealand subscribers using Xero.

This article, including the insights and analysis contained within it, was prepared by NZME with the support of Xero through Xero Small Business Insights data. All data used is anonymised and aggregated. For the purpose of informing and developing policies to promote small business in New Zealand. It contains general information only and should not be taken as taxation, financial, investment or legal advice. Xero recommends that readers always obtain specific and detailed professional advice about any business decisions.

For more Xero Small Business Insights – visit

-As published by NZ Herald, 8 June, 2018