Half of Australian small businesses are running in the red

PUERTO ALCUDIA, SPAIN – JANUARY 19: Juan Antonio Flecha of Spain and SKY Procycling sets the pace on an uphill ride during a SKY Procycling team training camp in Puerto Alcudia, on January 19, 2011 in Mallorca, Spain. (Photo by Bryn Lennon/Getty Images)

Accounting software provider Xero had always maintained that the best value it provides is the pool of data that it holds on small businesses around the world. Now a new analysis of Australian businesses has shown some eye-opening numbers.

To coincide with the Xerocon conference in Melbourne this week, the software company and KPMG released the Small Business Insights report, compiled entirely from aggregated and anonymised data held within the Xero database – rather than through humans filling out surveys.

The headline figure was that in June this year, just 50.7% of Australian small businesses had a positive cashflow.

Although shocking that half the businesses in the country are in the red, the latest figure is actually an improvement on June 2016 – when those with positive cashflow was in the minority (48.9%).

The prevalence of negative cashflow is perhaps not a surprise, when you consider that on average it took 36 days to settle a 30-day invoice during June. That also is better than last year, when it took almost 40 days for Australian small businesses to be paid what they’re owed.

Xero globally reached 1 million subscribers earlier this year, and says it has half-a-million users in Australia.

“Traditionally, it’s been difficult to get aggregated data on small business because of the lack of centralisation,” said KPMG special advisor and demographer Bernard Salt.

“Xero Small Business Insights is a great leap forward. For the first time it provides real insight into how the Australian small business economy is tracking… It’s only a matter of time before the Xero Small Business Insights ‘dashboard’ is included in all management and board briefing papers indicating the state of the economy.”

The June figures also showed small businesses were a major contributor to jobs growth, with the number of employees for that sector increasing 1.3% in contrast to the Australian Bureau of Statistics general trend of 0.22%.

“Policy and regulation is most effective when based on timely, accurate data,” Xero Australia managing director Trent Innes said.

“Now, learning from a large sample of Australia’s 2.1 million small businesses, we can provide insights into their health for the benefit of those that interact with small businesses most.”

Xero Small Business Insights figures will be released monthly.

The journalist travelled to Melbourne courtesy of Xero.

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