New report shows businesses with integrated systems processing 2.6 times more sales whilst cashless transactions dominate customer behaviour.
What’s happening: Small businesses using digital tools are significantly outperforming those that haven’t adopted technology, with research showing substantial sales and productivity improvements for companies embracing point-of-sale systems, inventory management software, and integrated business platforms.
Why this matters: With small businesses contributing over $589 billion to Australia’s economy and employing more than 5 million people, their productivity gains are crucial for national economic growth. The Productivity Commission’s interim findings identify digital adoption as key to boosting Australia’s overall productivity.
The numbers paint a stark picture of Australia’s small business landscape. Technology adoption isn’t just about staying current, it’s becoming the defining factor between thriving enterprises and those struggling to keep pace.
The 2025 State of Small Business Report, released by Square in partnership with the Council of Small Business Organisations Australia (COSBOA), surveyed more than 500 small business owners and analysed transaction data to reveal a widening performance gap.
Digital tools drive measurable results
According to Square’s research, sellers using their software tools process 94% more in sales volume than sellers who don’t utilise digital capabilities. The performance gap widens further for businesses embracing full integration those with API connections process 2.6 times more sales and nearly twice the number of transactions.
However, the benefits extend beyond any single platform. Small businesses across Australia are discovering that digital tools from cloud-based accounting software to inventory management systems provide significant competitive advantages. Popular platforms like Xero for accounting, Shopify for e-commerce, and various CRM systems are enabling similar productivity gains.
The productivity improvements extend beyond raw sales figures. At Jayden Ong Wines in the Yarra Valley, manager Morgan Ong has seen firsthand how user-friendly technology transforms operations.
“Being able to onboard staff quickly with Square’s user-interface has meant I can focus more on details of service rather than on mastering new technology,” Ong said. “It’s a big time-saver.”
Integration eliminates manual work
For many businesses, the shift to digital systems represents a fundamental change in how they operate. Malcolm Briggs, owner of Impact Comics, experienced this transformation when expanding into online sales created reconciliation challenges.
“Having the Square system means we can sell comics in-store, online, and even at events without juggling different platforms,” Briggs explained. “Everything ties back together. It used to take hours to reconcile the register with online orders. Now the system does that work for us.”
This pattern appears across different software solutions. Whether businesses choose established platforms like MYOB, newer solutions like Deputy for staff scheduling, or industry-specific tools, the key benefit remains consistent: integrated systems eliminate repetitive manual tasks, freeing business owners to focus on growth and customer service.
Navigating adoption challenges
Despite proven benefits, adoption remains measured. While 85% of small businesses use at least one digital tool, investment levels suggest caution. According to Square’s research, most businesses planning technology upgrades expect to spend less than $5,000 over the next year.
Business owners face multiple barriers beyond cost considerations. Learning curves can be steep, particularly for owners who’ve operated traditional businesses for years. Data security concerns weigh heavily, especially for businesses handling customer payment information. Integration challenges arise when new systems must work alongside existing processes or legacy software.
These findings align with recent analysis showing only 28% of small businesses were using AI as of April 2025, compared to nearly 90% of large enterprises.
Marco Lamantia, Executive Director of Square Australia, emphasises that meaningful change doesn’t require massive overhauls.
“This report reinforces what we hear from sellers every day. Productivity gains come from small, consistent improvements, not big overhauls,” Lamantia said. “It’s about tools that reduce friction, remove repetitive tasks, and give time back to focus on what really matters.”
Practical steps for implementation
For small businesses considering digital adoption, experts recommend starting with priority areas. Point-of-sale systems often provide immediate benefits and measurable returns on investment. Cloud-based accounting software can eliminate hours of manual bookkeeping whilst providing real-time financial insights.
When estimating ROI, businesses should consider both direct savings: reduced labour hours, fewer errors and indirect benefits like improved customer insights and faster decision-making capabilities. Staff training costs should be factored into budgets, with many successful businesses allocating 10-15% of their technology investment to employee education.
Starting small proves most effective. Rather than overhauling entire operations, successful adopters typically begin with one system, master its capabilities, then gradually expand their digital toolkit based on demonstrated results and growing confidence.
Economic imperative drives adoption
The timing of this research coincides with broader economic pressures facing Australian businesses. The Productivity Commission’s interim findings highlight digital adoption, better data access, and small business technology enablement as potential drivers of national productivity growth.
COSBOA Chair Matthew Addison positions digital adoption as an economic necessity rather than optional upgrade.
“Technology is no longer optional. If you are still relying on pen and paper to run your business, you are at serious risk of being left behind,” Addison said. “The State of Small Business Report and Productivity Commission both make it clear that digital adoption is critical for lifting Australia’s productivity. Small businesses that embrace modern tools are more efficient, more competitive, and more resilient. This is not just a business decision. It is an economic imperative.”
Customer behaviour reinforces this shift. According to Square’s research, more than three-quarters of surveyed businesses report that most transactions are now cashless. Transaction data shows rapid growth in tap-to-pay via mobile, particularly among micro and service-based sellers requiring agility and speed.
As Australia navigates complex economic conditions, the productivity of its 97% small business majority becomes central to national recovery and resilience. The report’s findings suggest that with appropriate tools and support, these enterprises aren’t merely adapting: they’re leading the transformation.
The message from successful businesses is consistent: technology adoption isn’t about keeping up with trends. It’s about survival, growth, and contributing to Australia’s economic future. For the businesses still operating with pen and paper, the choice is becoming increasingly clear, adapt or risk being left behind.
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