1 Jul 2020

Businesses pick up since lockdown, cash flow still down

6:52 am on 1 July 2020

Small businesses are under increasing pressure with many waiting about a month for their suppliers to pay them.

Cropped image of an African barista carefully pouring milk from a stainless steel jug into a takeaway cup in a coffee shop

Photo: 123RF

May data from accounting software firm Xero showed the average amount of time for a small business to get paid had crept up to about 30 days, from 25 days in February.

New Zealand managing director Craig Hudson said delayed payments had a monumental impact on cash flow, and the trend was concerning.

"That is a sign of stress and a genuine concern. The most popular invoice term in New Zealand is seven days, so if a seven-day invoice is getting paid 30 days late that's quite considerable.

"Even though revenue is starting to come back ... it will take a much longer time to get paid for the work that the small business owner is doing, so there's still going to be this lag."

Hudson said big businesses in particular should prioritise payments to small.

The May data showed revenue year-on-year was 22 percent down, an improvement on April's year-on-year slump of 41 percent.

He was cautiously optimistic things were headed in the right direction.

"We've seen a bit of a bounce-back ... and a lot of work to go between now and when the next lot of numbers come out to maintain that.

"I know I saw a lot of people getting out and about and supporting small business [but] is that going to be a long term trend?"

Hudson said the data also showed businesses appeared to hire back employees which they might have let go the month earlier.

"In April there was a 4 percent drop in employee numbers within the small business sector but what we're seeing now on the back of coming out of lockdown is that they're starting to hire again and now we're only 1 percent down which is another positive sign."

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