This article first appeared on Yahoo Finance.
Is 2019 shaping up to be a repeat of last on the key issues for small businesses, such as late payments, access to capital and digital processes?
It doesn’t seem likely; 2018 put some changes in motion that can make real waves this year.
Here are some initiatives set to shift the small business landscape across Australia.
1. Government is becoming laser-focused on payment times
Cast your mind back to December 2017. For hundreds of thousands of small businesses on Xero in Australia, December was the month that positive cash flow peaked before the seasonal slowdown in January. 57 per cent had more money coming in the door than going out in December, and this figure fell to 49 percent by February.
That’s a recurring reality for small business owners. But the topic of late payments, and the consequential stifling of growth, did gain significant traction through 2018. We saw trends and stories spark conversations across small business circles and big business boardrooms right through to government offices and newspaper columns.
The sector is in the midst of major reform.
Momentum is building for change in the year ahead. The government and big business have begun a large push to improve payment times for small businesses, including:
- The Business Council of Australia launched a voluntary code for businesses to commit to paying suppliers within 30 days
- Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell launched an inquiry into payment times
- ASBFEO announced a new name-and-shame review of payment times for government departments
- State governments have committed to paying their small business suppliers in less than seven days, and the federal government intends to follow suit
- Most recently, Prime Minister Scott Morrison unveiled a new payment times plan for small business.
The topic won’t go away in 2019, nor should it. Ongoing initiatives such as the trans-Tasman standards for electronic invoicing will maintain pressure for frictionless payment processes. In fact, the infrastructure to support standardised e-invoicing is almost ready, and 2019 look like being the year that invoicing becomes truly digital.
2. A cross-section of sectors look to close the funding gap
While payment times slow small business growth and development, access to capital continues to be another issue for many.
According to the ASBFEO 2018 report on affordable capital, many small business owners still think that gaining access to finance through a business loan is either too difficult or too expensive.
Meanwhile, Xero’s State of Lending Report suggests Australia’s small businesses would borrow as much as $80 billion over the next 12 months, if they could get the funding.
The Royal Commission recently shed a light on some of the key issues in this space, sparking a renewed opportunity for government, financial services firms and the accounting sector to help small businesses understand the options for financing in the year ahead.
The technology sector has a lot to offer here, too. It is possible for small business owners to share up-to-date financial reports from Xero with big banks or smaller alternative lenders, for example, while engaging their accountant to assist, but many business owners remain unaware these options exist.
3. The digitisation of small businesses seeks to untangle red tape
2018 was the year the Australian government worked with digital software providers and advisers to keep pace with small business innovation at a national level. As a result, digital connectivity is transitioning from a small business nice-to-have to a have-to-have.
The mandatory adoption of Single Touch Payroll (STP) for businesses with 20 or more employees is a prime example – and the decision on whether to extend it to businesses of all sizes is not far off. The wide-scale rollout of two-step authentication (2SA) is another example of the maturing of digital connectivity. As standard processes become increasingly digital, security must do the same.
Meanwhile, open banking reforms are underway to create a new standard for data sharing.
Amid the changes, the tangle of red tape still prevails; data tells us small business owners spend up to 11 hours a week on compliance.
This year, expect digital services providers and a community of trusted accountants and bookkeepers to work alongside government to help streamline compliance processes and lessen the burden as we break ‘disruption’ down into incremental, achievable steps that empower small businesses owners.
4. Small nudges can create impact
With all these small nudges to change already underway, it’s important we remember the reason they gained momentum in the first place.
Why did your local florist first choose cloud-based technology to connect her inventory tracker, point-of-sale system and e-commerce site to her accounting dashboard? Why did your local farmer link his accountant directly into data from a financial management app? And why do trends show that a small business connected to at least one app, experiences business and revenue growth?
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