Xero survey shows small business pandemic ‘recovery’ largely driven by inflation

A new report from Xero, Small Business Snapshot: United States and Canadaprovides insight into business performance and the impact of inflation on small US businesses.

The report found that while small business growth appeared to be nearly double the pre-pandemic average, this was largely due to higher prices rather than an increase in the quantity of goods and services. sold. In short, this was likely due to inflation and small businesses raising their prices to meet market conditions.

The report is part of the new Xero Small Business Insights (XSBI) program which includes quarterly updates on the small business economy in the United States and Canada, based on aggregated and anonymized data from tens of thousands of customers. xero. It also launched a special XSBI report:

Inflation skews the numbers

The report, produced in partnership with Accenture, tracks small business performance throughout 2017, reveals:

“What gets measured, gets managed” =Chris

  • Sales growth in March 2022 was 11.3% year-over-year (y/y). This is not quite double the pre-pandemic average growth of 6.7% (y/y), but slower than the 12.6% (y/y) rise recorded in February 2022.
  • Inflation rose to 8.5% (y/y) in March 2022, meaning real sales growth, which excludes price effects, was much slower at 2.8% (y/y) ) (and down from a 4.7% (y/y) rise in February 2022).
    • In other words, removing the price impacts shows that around three-quarters of sales growth in March 2022 was due to higher prices rather than an increase in the quantity of goods and services sold.

“In March 2022, the United States had higher inflation than any other major economy.[1]said Chris O’Neill, Chief Growth Officer, Xero. “As borrowing costs rise, expenses rise, and customer dollars decline in purchasing power, it’s more important than ever for small businesses to be in control of their finances. Understanding exactly what is happening to their costs and profit margins at any given time will help them weather this tricky time better. »

Payment terms are a more positive sign of stability

Fortunately, the information in the report contained better news for small businesses in terms of payment times and late payments for small businesses in the United States. Late payments typically have a negative effect on cash flow and liquidity, often forcing small businesses to seek extensions and increase borrowings; thus, payment terms generally reflect the functioning of the company’s cash flow:

  • Small businesses waited an average of 23.5 days for their bills to be paid in March 2022, which was faster than the 2021 average of 25.0 days.
  • Payments were on average 5.6 days late in March 2022 after an average of 7.0 days in 2021.

“It is encouraging to see timely payments to American small businesses; naturally, this helps support cash flow, which is the lifeblood of any business. This could be, at least in part, due to the increased use of e-invoicing processes and online payments as more small businesses embrace digital solutions,” O’Neill said. “However, small business owners should note that as inflation continues to rise for the rest of the year, they should stay on top of their accounts and work hand-in-hand with a trusted advisor to ensure they maintain cash flow and profitability.”

Amit Singh, CEO of Accenture, said, “Small businesses are the heart of the American economy – they make up more than 99% of all businesses. Understanding and tracking the performance of small businesses, especially in times of economic uncertainty, is absolutely crucial for effective economic management and public policy. The Xero Small Business Insights program provides timely information on the health of small businesses. The measures in this report have proven the resilience of small businesses in times of challenge – lockdowns, social distancing mandates and now unprecedented growth in inflation.

The launch of Xero Small Business Insights for the United States and Canada was announced at Xerocon New Orleans, one of the world’s leading events for cloud accounting leaders. Accounting and bookkeeping partners and the Xero app partner community come together for two days to hear the latest news from industry leaders and get expert insights on the latest Xero tools and features for help them save time, grow their business and have a greater impact on their customers. Hit. Xero also regularly produces Xero Small Business Insights for Australia, UK and New Zealand. Visit xero.com/xerosbi for more information.

[1] Major economy refers to G7 economies, CPI data for March is available at https://data.oecd.org/

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