As we head into the budget, many of the nation’s more than 2.3 million small businesses will be watching for measures to aid the recovery of this key sector of the economy.
A recent Xero survey found 17% of small business owners believed the sector should be the central focus of the budget, and nearly one in two said it should be a high priority.
The upcoming Federal Budget is indeed one of the most important for the small business community in recent history, with small business owners – hit twice as hard as big businesses by the COVID-19 pandemic – seeking for a lifeline.
We’ve already begun to see how the Government will tackle small business support, starting with the JobMaker Digital Business Plan to overhaul the way the Government interacts with businesses and individuals. The plan’s economy-wide digitisation measures will be critical to small business confidence, recovery and future prosperity.
But it has not been all doom and gloom in the small business community. We have seen the resilience and entrepreneurial spirit of Australia’s small business community shine through despite the challenges they have faced.
The pandemic has not only shown the agility of some small businesses in their ability to adapt and thrive with changing times; it has also acted as a catalyst for an explosion in newly planned small businesses. This is in line with recent government figures that show a spike in applications to start a business.
With the increase of sole traders expected to continue in the coming months, there are measures the Government could introduce in the budget to enable this growing cohort of nascent small businesses to digitise and to accelerate our economic recovery.
Entrepreneur training scheme
New research from Xero found more than one in four (28%) small businesses want the Federal Budget to include measures that support young entrepreneurs to grow their network and experience. New business incentive schemes were also at the top of the wish list for nearly one in three (29%).
From chefs to property consultants, COVID-19 has seen people across sectors make the leap into entrepreneurship to forge their own path to recovery. This trend is demonstrated by the latest figures from the Australian Securities and Investments Commission, which shows that new business registrations jumped in July, up by more than one third from the same month in 2019. There were some 48,000 business registrations, compared with roughly 36,000 in July the previous year.
With more business activities shifting online amid the pandemic, it’s imperative entrepreneurs embrace the digital tools that can enhance success in this space, and that the Government encourages them to do so.
We have seen the importance of digital enablement during COVID-19 in Xero Small Business Insights data. When we compared businesses that were using apps to manage their business before the crisis to those that were not, we found that small businesses using apps saw lower revenue declines (by 12%) during the crisis than other small businesses.
These businesses were also better able to retain staff: job losses for digitally enabled small businesses were 12% lower than for non-digitally enabled small businesses. Similarly, the small businesses that made heavier use of apps were even more resilient.
One in five (21%) small businesses want to see incentives to enable them to use more technology featured in the budget, with nearly one third (30%) planning to adopt more digital tools to help run their business if the budget outcome is favourable.
The Government’s $800 million investment to help businesses participate in the economy with confidence is a welcomed step, which includes driving the digital agenda within the small business sector.
Accelerate adoption of e-invoicing
Late payments have been one of the biggest pain points for small businesses, affecting the lifeblood of their business – cash flow.
Xero Small Business Insights August data showed small businesses were waiting, on average, 24.4 days to be paid.
We know from the experience in other countries, such as Sweden and Italy, that adopting e-invoicing leads to positive outcomes. It saves businesses and their customers time, reduces manual errors, and expedites payment. Here in Australia, e-invoicing is now accessible through accounting platforms as well as through inexpensive, dedicated software.
The Federal Government has committed its agencies to paying e-invoices up to $1 million within five days. It will enable fast payments by mandating government agency use of e-invoicing by 1 July 2022.
With mandated e-invoicing among Commonwealth agencies, we are hopeful that uptake by other high volume invoicers, including state agencies and big business, will follow closely.
These measures combined could provide the much-needed runway for this new wave of entrepreneurs to thrive.
The pandemic has reminded us of the integral role small business plays in Australia’s economy. With support in the upcoming budget, the sector can truly lead the way to sustainable, long-term economic prosperity.
- Angus Capel is Xero’s Small Business Advocate