As we enter the new financial year, it’s clear the challenges of COVID-19 will be with us for at least several months more. Fortunately, there are technology solutions that can help small business during this difficult time. They can boost the likelihood of being paid promptly, reduce the compliance burden of tasks such as JobKeeper, and leave more time to focus on the business.
The solutions come in the form of cloud-based accounting software and third-party apps that plug seamlessly into it. These apps cover everything from financial forecasting and employee rostering to point of sale and inventory management.
All are cloud-based tools, meaning your data sits on remote servers, not on your business premises. Being in the cloud allows you and your employees to see the same data in real time, whether you’re logging on from your phone at home or via computer in the office.
Revenue and employment
We recently examined the performance of hundreds of thousands of Australian small businesses on the Xero platform. A striking data point emerged: businesses which use connected apps tended to outperform businesses that use none. In fact, these tech-using businesses tended to grow revenue at a pace about 50 per cent faster than peers with no apps. And their annual employment growth was nearly double that of businesses with no apps.
Why would there be such a disparity? One likely reason is that these apps save business owners time, especially sole proprietors or small employers. That lets them focus more on building their business and less on mundane administrative tasks. Another reason is that they’re frequently working with more granular, real-time data. And that fuels smarter decision-making.
Take employee rostering, for example. Third-party apps such as Deputy can give workers limited access to rostering and timesheets, effectively outsourcing much of the mundane recordkeeping and shift-swapping to the parties closest to the details. A business owner can save up to two hours a week using such an app, research suggests.
Meanwhile, Xero Payroll makes handling JobKeeper payments to employees simple, from filing a pay run with Single Touch Payroll to maintaining a list of workers receiving the wage subsidy.
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Payment services
One category deserves special mention in today’s environment: payment services. Few things are more important than getting paid, and the sooner the better. In Australia, invoices created on the Xero platform with an attached payment service were paid an average 55 per cent sooner than invoices without. That’s the difference between a 22-day wait and a 12-day wait. While these payment services charge a small fee, the benefits of faster payment may offset this cost.
E-invoicing
It’s also worth noting that e-invoicing is a technology that’s changing how businesses get paid and pay their own bills. The Australian government has pledged to pay e-invoices of up to $1 million within five days, starting 1 July. And it will be pressing large businesses to adopt a similar standard for their smaller suppliers. This ability to send e-invoices is available on select accounting and small business platforms. It should streamline accounts payable and receivable and speed up the payment cycle for all parties involved.
Know your cash flow
During these challenging times, it’s important that you understand the numbers behind your business. If you’re using online accounting software, it offers tools that deliver visibility and insights that will help you manage your cash flow. Xero’s short-term cash flow feature visualises your bank balance 30 days into the future, showing the impact of existing bills and invoices if they’re paid on time.
This not only provides clarity, but will help you determine which invoices to follow up, and understand how your cash flow will change if you pay a bill this week instead of next.
Now more than ever, having financial visibility from the outset of the new financial year is key.
When taken all together, the current and emerging technology promises to empower small businesses and help them thrive amid challenging times. Businesses that embrace these tools will be well placed to succeed in the second half of 2020 and beyond.
Angus Capel is the Small Business Advocate at Xero.
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