Xero finds “alarming” stats showing SMEs only plan for short-term
New data from Xero finds 73% of small businesses only plan up to six months ahead.
Small businesses are not looking far enough head and are focusing too much on their day-to-day, according to new data from global small business platform Xero. The majority of small businesses (73%) are only planning up to six months ahead and one in three of those businesses only have a day-to-day focus. Just 6% of businesses surveyed had a five-year plan.
“The data, while alarming, is unsurprising," said Trent Innes, managing director for Xero Australia. "It shows that by and large, Australian small businesses don’t have a long-range view when it comes to business planning. Just as employees shouldn’t live paycheck to paycheck, small businesses should be thinking long-term to plan for change and growth."
Xero also found that Australian small business owners tend to be conservative in terms of their growth aspirations. The majority (61%) are not focused on long-term business growth and one in three (32%) were only focused on maintaining their current levels of business.
While Xero did not investigate the reasons for this, small businesses have been faced with numerous difficulties in the past few years that could contribute to a conservative mindset. The difficulty of accessing small business finance may have played a part, for example, as well as difficulties in payments which can lead to significant cash flow issues for businesses.
However, Innes said despite difficulties, it was important for all small business owners to focus on the future.
“Small business owners are focused on the day-to-day as they have immediate outgoings," said Innes. "As we ring in the new financial year, we urge small businesses to use this opportunity to start thinking about future proofing their business for long-term success."
Xero released the data to coincide with its announcement of its vision for a frictionless economy by 2023. That is, one in which businesses can operate more efficiently and with fewer barriers. According to Xero, there are five key things that will define the small business economy and small business success five years from now:
- Frictionless economy by 2023. This has to do with digitising small business processes and reporting, for which we are making "positive inroads" in, according to Xero.
- Digital systems of records to become "must haves". Keeping financial records digitally will become required rather than a "nice to have".
- E-invoicing to become simpler and commonplace. Digital invoicing and the exchange of electronic invoices will have a rapid uptake in the next five years, leading to savings in time and money.
- Payment times under 30 days. Australia has some of the longest payment times in the world, but this is continuing to be reduced. Xero would like to see the average invoice to be paid within 30 days by 2023.
- Gains from increased cash flow. According to Xero, "reduced payment times and frictionless economy should translate into an uptick in cash flow positivity and profitability for many small businesses".
According to Innes, the future of small business is one built on technology.
"The digitisation of business is happening at all levels and, increasingly, it’s being mandated by government," he said.
Innes urged small businesses to consider these sweeping changes and start putting plans in place to future-proof their business.