Cash flow woes push small business owners to make sacrifices


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Cash flow has long been a challenge for small businesses in the Bay of Plenty and across Aotearoa New Zealand. With recent inflation, steep interest rates and reduced consumer spending, it’s apparent small businesses are walking a tightrope every day.

To better understand perspectives and behaviours towards cash flow management, Xero surveyed small business owners across Aotearoa New Zealand and the results were concerning to say the least.

A staggering 46% of business owners and 60% of sole traders aren’t paying themselves in order to keep their business running.

Additionally, over half of Kiwi small businesses (52%) have increased prices to cover their cash flow challenges, while a similar number (48%) have looked to review and remove costs.

It’s clear our small business owners are facing significant financial stress and as a result, it’s beginning to take a toll on both their emotional and physical health.

Cash flow is one of the biggest hurdles our small business owners are facing and Kiwis need to be aware of the sacrifices they’re making to persevere through this challenging time.

When small business owners experience cash flow issues, the first thing to go is their own pay. In this current cost-of-living crisis, this puts our small business owners in a vulnerable position.

The inability to pay suppliers often comes next, having a knock-on effect throughout the economy.

It’s a fragile cycle which can see business owners in the Bay of Plenty and across the country using their personal savings, working unsustainable hours, and sacrificing their own wellbeing to keep the business running.

When asked about the emotional and physical impacts of cash flow management, business owners reported feeling stress (80%), anxiety (70%), trouble sleeping (60%) and losing time with friends and family (47%) over the past 12 months.

The research also revealed 94% of small business owners weren’t achieving their business goals, and 90% of those feeling less confident they’ll meet their financial obligations are suffering from stress.

This shows us how closely business goals and financial health are connected to the stress and anxiety of our small business owners.

Across the country, inflation has heightened cash flow struggles, with 48% claiming it had a high impact on their cash flow management these past six months.

These figures are a worrying sign for the future of our small business community and highlight the need for change.

It’s no secret late payments are one of the biggest contributors to small business cash flow issues. In fact, last year we found late invoice payments were costing Kiwi small businesses $456 million annually.

Getting paid on time is crucial for small business operations, and this largely relates to big businesses paying their invoices on time.

That’s why at Xero, we’ve challenged big businesses to commit to paying invoices within 10 working days. This will not only help our small business community but strengthen the New Zealand economy as a whole.

However, it doesn’t just come down to big businesses, small business owners have the power to take matters into their own hands and tap into digital tools to help manage cash flow.

Whether it’s for planning, forecasting, or even invoicing, it’s time to make the most of the digital tools available.

Related: Room to grow for SME wellbeing

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Bridget Snelling
Bridget Snelling
Xero New Zealand Country Manager

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