Xero Reports Small Business Sales Return in 2024

Xero's latest data release shows that small business sales are starting to stabilize in 2024. Despite the decline in the March quarter, sales showed year-on-year improvement, with February marking the first increase in sales in 13 months. However, average payment times have improved slightly, while late payments have worsened, now almost 10 days late.

The Xero Small Business Insights (XSBI) program, which collects data from Xero's North American small business subscribers, revealed these trends. The system tracks sales and payment times in four major US regions: West, Midwest, Northeast, and South.

February sales growth is a positive sign for small businesses, marking the first increase since January 2023. Although sales fell 1.8% year over year in the March quarter, this is an improvement from a 2.4% decline in the previous quarter. Monthly data showed mixed results, with sales improving in February (+1.3% year-on-year) but falling again in March (-4.7% year-on-year). March's decline is partly due to Good Friday taking place in March this year instead of April.

At the regional level, the Northeast experienced the largest decline in sales (-3.5% year-over-year) in the March quarter, followed by the Midwest (-3.3% year-over-year), the South (-1.7% year-over-year), and the West (-0.5% year-over-year).

Xero's economist, Louise Southall, highlighted the significance of February's growth, suggesting it represents a turnaround in small business sales. He highlighted the Federal Reserve's expected interest rate cuts as a potential source of strength in consumer spending, which could support small businesses.

Average payment times showed little improvement, with small businesses waiting an average of 28.5 days to be paid in the March quarter, down from 28.7 days in previous quarters. However, late payment times worsened, with businesses getting paid an average of 9.8 days in the March quarter, up from 9.0 days in the previous two quarters. February saw a significant increase in late payments, averaging 12.6 days late.

Ben Richmond, Managing Director, North America at Xero, emphasized the importance of addressing late payment issues. He mentioned the role of advisers in helping small businessmen to use strategies to encourage timely payment. Richmond suggested initiatives such as offering a variety of payment options, incorporating “pay now” features on invoices, and sending timely customer reminders to reduce late payments.

Photo: Xero