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Cash flow central to SME success during recession

WORKPLACE WELLBEING

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As recession continues to impact the country, small businesses in the Bay of Plenty and across Aotearoa New Zealand face the consequences of slow sales growth, high inflation, and less consumer spending.

As the pressure from these issues grows, cash flow management has never been more important.

With challenging market conditions, small business owners are struggling to manage finances – often causing personal stresses at home.

The key to navigating through uncertain times starts with knowing your numbers. Remaining up close and personal with your cash flow allows you to focus on making better, well-informed decisions for your business.

But above all, it allows you to manage your wellbeing more effectively. A recent Xero report found 15% of small businesses in New Zealand said work issues caused personal stress most or all of the time.

Cash flow issues are a systemic and volatile cycle, which see business owners dipping into their own personal savings, working unattainable hours, and ultimately sacrificing their emotional and physical wellbeing to stay afloat.

In this recession, high inflation is also a major factor, with price hikes affecting every part of the economy. For many businesses, this means higher supply costs.

Almost half (48%) of small businesses said inflation had eroded their cash flow in 2023, and in the 12 months to June, 55% of small businesses experienced cash flow issues, with 18% experiencing “significant” cash flow problems.

Cash flow management takes an emotional and physical toll on business owners. A total of 80% of company owners surveyed by Xero said they were stressed about cash flow, 60% said they had trouble sleeping, and 47% had lost time with friends and family.

Thousands of Kiwi small businesses fold each year. More often than not, it’s because they’re unable to overcome cash flow issues.

During these challenging economic times, it’s important small business owners understand what their cash flow needs are and what they can do to get paid faster.

Digital tools are the key to effectively managing cash flow. They help you understand exactly how your business is performing, putting you in a position to make more informed decisions.

They flag when cash flow is due to be low, allowing you to prepare for the squeeze and push for more work. They also reveal when cash flow will be strong, allowing savvy business owners to take calculated risks and make the most of opportunities that arise during these periods.

It’s time for business owners to take matters into their own hands and embrace the support available to them. Whether that’s using platforms like Xero Analytics Plus, which lets you avoid losses by calling for prompt payment upon completion of a job, or Xero’s Assistance Programme, which offers free access to face-to-face, online chat, and phone counselling.

Small businesses should also consider registering their interest for eInvoicing, a technology which will help improve payment times by greatly increasing accuracy and security while reducing human errors.

By taking control of your cash flow, and knowing your numbers, you give yourself the best possible chance to navigate tough times and come out the other side better off.

Read more: Cash flow woes push small business owners to make sacrifices

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Bridget Snelling
Bridget Snelling
Xero New Zealand Country Manager

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