SMEs see positive start in 2024 despite payment delays

Xero, a global small business platform, has released new data revealing a promising start for Australian small businesses in the first quarter of 2024.

Despite a slowdown at the end of 2023, the data showcases robust growth in wages and jobs, coupled with a rebound in sales. According to Louise Southall, Xero Economist, this positive momentum signals a significant improvement for small businesses compared to the previous quarter.

Sales saw a notable uptick in January and February after a sluggish December, with sectors like healthcare and real estate performing particularly well. Additionally, small business hiring experienced a substantial rise, particularly in March, marking the largest increase since October 2022. Wages growth also picked up, exceeding the long-term average, with notable contributions from sectors like hospitality. Despite these positive indicators, small business payment times remained relatively unchanged, with businesses waiting an average of 22.6 days to be paid in the March quarter. According to Anthony Drury, Managing Director ANZ at Xero, these findings provide valuable insights into Australian small business performance, offering optimism for continued growth in 2024.

Louise Southall, Xero Economist, commented, “The improvement from a tough end to last year is a welcome sign that small businesses started 2024 better off. The Index dropped below 100 points in December last year, so it’s encouraging to see stronger growth in three critical success levers — jobs, wages, and sales — during the first quarter of this year.”

Sales Off to a Positive Start in 2024:

Sales growth rebounded significantly in January (+6.1% y/y) and February (+6.9% y/y) after a period of weak sales in December (+1.9% y/y).

Healthcare (+13.5% y/y) and real estate (+10.0% y/y) were the best performing sectors in January and February.

The ACT recorded the largest sales growth in the first two months, while Tasmania saw the softest gains.

Jobs Growth Experiences Significant Rise:

Small business hiring continued in the March quarter (+3.7% y/y), particularly strong in March (+4.3% y/y), the largest rise since October 2022.

Variation in jobs growth across industries and states, with healthcare and Western Australia leading gains, and hospitality recording a decline.

Wages Growth Picks Up:

Wages growth is now above the long-term average (+3.0% y/y), with South Australia and Tasmania leading.

Hospitality sector pays the largest wage increases across industries.

Little Change in Small Business Payment Times:

Small businesses waited an average of 22.6 days to be paid in the March quarter, with payments late by an average of 6.5 days.