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Xero’s latest Small Business Insights data revealed that the rental, hiring, and real estate industries experienced the toughest December and January of any sector.
According to the small business platform, the Australian Small Business Index — based on aggregated and anonymised transactions from hundreds of thousands of small businesses — was 93 points in January, down 26 points from November, which Will Buckley, country manager for Xero Australia, believes signals “small businesses are beginning to feel the impact of cost-of-living pressures on their customers.”
“We are seeing a slowdown in sales that will be putting pressure on small businesses who are recovering from a demanding few years. This then flows through to their capacity to increase wages and attract staff,” he added.
Across the rental, hiring, and real estate industries, sales fell 2.5 per cent year-on-year from December to January, compared to overall sales growth of 7.2 per cent year-on-year.
Xero economist Louise Southall said this is “likely a reflection of the ongoing rises in interest rates on housing activity and discretionary spending.”
“Using the most [recent] consumer price index (CPI) result (+7.8 per cent) as a proxy for prices, sales volumes fell 0.6 per cent year-on-year in January. This shows that small businesses are likely selling fewer goods and services than a year ago,” Ms Southall said.
Similarly, job growth fell by 0.2 per cent as part of a wider slowing of employment throughout all industries during January, while only the healthcare sector reported lower wage growth than the rental, hiring, and real estate industries’ 2.4 per cent. In another blow for the housing sector, construction has fewer jobs (0.3 per cent) than a year ago — the first decline recorded by the industry since May 2022.
The first month of 2023 saw the average length of time small businesses waited for payment rise 0.6 days to 23.8 days, slightly above the 23.1 days average recorded throughout 2022 and 2021, while late payments also rose 1.2 days to just over one week (7.7 days), its highest point since July 2020.
Mr Buckley said the platform “will be closely monitoring the time to be paid metric over the coming months for signs of emerging cash flow stress amongst small businesses.”
“At a time when small businesses are facing numerous economic headwinds, it is crucial for bigger businesses to be paying their invoices on time.”
He advised any small business “starting to feel a cash flow squeeze” to engage in conversations with their adviser and “establish a plan for the coming months.”
