Xero survey shows small businesses “recovery” from pandemic largely driven by inflation

A new report from Xero, Small Business Snapshot: United States and CanadaProvides insight into business performance and how inflation is affecting American small businesses.

The report found that small business growth appears to be nearly double the pre-pandemic average, largely due to higher prices rather than an increase in the volume of sales of goods and services. In short, it was caused by inflation and small businesses raising their prices to compensate for market conditions.

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

Inflation has reduced the numbers

The report, produced in partnership with Accenture, tracks the performance of small businesses since 2017, revealing:

“What gets measured, gets managed” = Chris

  • Sales growth in March 2022 was 11.3% year-on-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) growth recorded in February 2022.
  • Inflation rose to 8.5% (y/y) in March 2022 which meant that real sales growth, which excludes price effects, was a much slower 2.8% (y/y) (and down from 4.7% (y/y) growth in February 2022).
    • That is, when price effects are removed, nearly three-quarters of the sales increase in March 2022 was due to higher prices rather than an increase in sales volume of goods and services.

β€œIn March 2022, the US was experiencing higher inflation than any other major economy[1]said Chris O’Neill, Chief Growth Officer, Xero. Knowing what is happening to their costs and profit margins at all times will help them better navigate this difficult period. “

A more positive sign of payment time stability

Fortunately, the report’s insights included some good news for small businesses regarding payment times and slow payment delays. increase their borrowing; As such, payback time generally reflects how the business cash flow is performing:

  • Small businesses waited an average of 23.5 days to pay invoices in March 2022, which was faster than the average of 25.0 days in 2021.
  • Payments were an average of 5.6 days late in March 2022, after an average of 7.0 days in 2021.

“Seeing timely payments to U.S. small businesses is encouraging; naturally, this supports cash flow, which is the lifeblood of any business. This may be due, at least in part, to the increased use of electronic invoicing processes and online payments as more small businesses embrace digital solutions. There are,” O’Neill said. “However, small business owners should note that as inflation rises through the rest of the year, they need to stay on top of their accounts and work hand-in-hand with a trusted advisor to ensure they are maintaining cash flow and profitability.”

Accenture Managing Director Amit Singh said: “Small businesses are the heartbeat of the US economy – making up more than 99% of all businesses. Especially in times of economic uncertainty, understanding and tracking the performance of small businesses is critical to effective financial management and public policy. Xero Small The Business Insights program provides timely insights into the health of small businesses. The metrics in this report prove the resilience of small businesses during challenging times – lockdowns, social distancing mandates and now unprecedented increases in inflation.

The launch of Xero Small Business Insights for the US and Canada was announced at Xerocon New Orleans, one of the world’s premier events for cloud accounting leaders. Accounting and bookkeeping partners and the Xero app partner community gathered over two days to hear the latest from industry leaders and gain expert insight into new Xero tools and features to help them save time, grow their businesses and make a greater impact on their customers. Success. Xero also produces regular Xero Small Business Insights for Australia, the United Kingdom and New Zealand. For more information visit xero.com/xerosbi.

[1] Major economies refer to G7 economies, CPI data for March can be found at https://data.oecd.org/

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