Greater use of technology key to improving the productivity of small businesses

OPINION: Kiwi ingenuity. The No 8 Wire mentality. Working smarter, not harder. We’ve all heard the local jargon bandied around about improving business innovation, productivity and efficiency here in New Zealand. But as a country we’re still approaching it with that other well-recognised Kiwi phrase: ‘She’ll be right’.

Productivity is a topic we’ve researched extensively at Xero and discussed at length with industry leaders and the Government. Prior to Covid-19, New Zealand’s GDP per capita was about 30 per cent below the average of the top half of the OECD.

We conducted further research that concluded last month and learned that 85 per cent of Kiwi small business owners think we need to operate smarter – not just harder – to rebuild the New Zealand economy.

Smarter means having the right tools and real-time information at your fingertips to make the best decisions for your business. It also means getting the insights into your business to take proactive action – not waiting till the proverbial hits the fan because you didn’t see it coming.

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That’s why at Xero, we’ve been talking to the Government about the opportunity for a fiscally-neutral incentive to support small businesses to implement cloud-based technology.

To be clear, cloud simply means accessing tools, information and insights through the internet – think internet banking and online accounting. In the last decade there’s been a proliferation of small business orientated cloud tools that have been developed across all industries and verticals.

Cloud-based tools can be accessed anywhere, anytime and in real-time so you can collaborate and make decisions quickly. They’re also a fraction of the price of data stored on servers under the desk. Many cloud tools are subscriber based, so they’re flexible, available from anywhere and the quality is as good, if not better, than those available to large enterprises.

But is cloud technology simply a solution looking for a problem? Not at all. Small business research studies showed that time, money and lack of information were the main barriers small businesses faced. Despite this, since Alert Level 4, nearly two-thirds of Kiwi small businesses said they wanted to increase their business’ productivity and 42 per cent wished their business had better processes in place before the lockdown.

So we have a clear problem to solve, and a clear and present solution - that we’re not fully utilising. If we can help more small businesses become technology enabled we can not only remedy our long-standing productivity problem, but also improve our chances of opening up markets internationally and small business profitability. We have an opportunity to build on the momentum that Covid-19 has clearly provided for our small business owners and tackle our productivity issues head on.

And if you’re still left wondering, here are a few examples of where cloud technology can help right now.

Focus on cashflow

There are few things more critical to a small business than cashflow. However, during lockdown, only 12 per cent of New Zealand small businesses leveraged the cloud-based cashflow tools available to them. That meant that at a time when managing cashflow was crucial to survival, they were walking in the dark.

For those not on the cloud, their business information was literally in lockdown – on premise – leaving them and their adviser without real-time cashflow forecasting to know if they’d be able to pay overheads and expenses and have insights to make informed business decisions.

Nearly four-fifths of Kiwi small businesses said they would have made better business decisions with access to real-time, accurate information about their business.

Even in more positive economic times purpose-built small business tools that can be accessed anywhere and anytime are one of the most important areas of investment. A growing business needs to know what cash it will have on hand, because if they can’t measure it, they can’t manage it.

Tighten up on inefficiencies

Many businesses waste countless hours manually transferring data.

Whether filing information from bills and receipts, inputting employee leave balances into payroll, or collating information for a bank loan, manual data entry is an inefficient way to work and could lead to errors and inconsistencies. At the very least it’s taking them away from something more important, or interesting.

If a small business owner has to manually import or collate data to run any aspect of their business, they are probably missing out on a piece of technology that can help.

Scenario-plan with your adviser

Working smarter requires a bespoke business strategy that is malleable to changing operating environments and economic circumstances.

For 60 per cent of small businesses owners Covid-19 helped them realise their business would benefit from time to create or update their business plan. There are thousands of resources to help develop business plans. The most important thing is to use accurate business information to inform decisions.

An accountant or bookkeeper who knows the business is best placed to help find the opportunities to build out a scenario plan for the ups and downs that will inevitably lie ahead.

As a nation, we’ve navigated Covid-19 so far with a strong strategy and by playing our individual part. Surviving the ongoing economic and wellbeing impact for our small businesses requires the same approach.

Let’s throw out our ‘she’ll be right’ attitude when it comes to tackling productivity and use every lever we can to give our small businesses the best chance of success through this time. Cloud-based technology is just one lever of many, but it’s only valuable if we all stare into this opportunity and take action.

No-one is coming to save us; we’ll have to design our way out of this ourselves by making some big bets as a business community, with the support of the Government. My big bet on New Zealand’s small business future is that if we work together to become the most tech-enabled nation, we’ll also become the most productive nation.

Anna Curzon is the chief product officer at Xero

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