Late payments hit 3-year low as pledges from big business kick in - Xero
Page content transcription
If your browser does not render page correctly, please read the page content below
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 1 of 22 Monthly commentary Demian McLean Late payments hit 3-year low as pledges from big business kick in Small businesses were paid faster in July than they have been in nearly three years as big Australian companies began honouring a pledge to settle invoices sooner, Xero data shows. Small suppliers with 30-day payment terms saw their bills settled in an average 34.6 days, down from 36.2 days a month earlier. While that means payments still arrived almost five days late, the trend is improving. July’s figure extends a gradual slide recorded since Xero began following payment times in September 2014. The July move is notable, as it’s the first month that some large businesses begin implementing a Business Council of Australia pledge to settle small- supplier invoices within 30 days. Some big companies, including Coles and Woolworths, have promised to pay within 14 days. The commitments are not legally binding.
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 2 of 22 “It’s encouraging to see payment times are dropping,” said Xero Australia Managing Director Trent Innes. “Small businesses employ almost half of Australian workers. If owners are getting paid sooner, that gives them the confidence to hire more people.” Indeed, more small businesses enjoyed positive cash flow in July than in any month in the past three years. Some 55.3% of businesses had more money coming in the door than going out, based on Xero data. That’s up from 50.7% a month earlier. Both cash flow and payment times are based on anonymised, aggregated data selected from Xero’s 500,000 Australian subscribers. The metrics are part of Xero Small Business Insights, one of the most comprehensive, real- time pictures of small business conditions available. While the July small-business data is encouraging, it remains to be seen whether the trend is sustained — and whether it’s enough to satisfy critics of big-business policies. Voices in Canberra have called for stronger measures than voluntary payment codes. Kate Carnell, head of the Australian Small Business and Family Enterprise Ombudsman, has suggested lawmakers consider mandatory payment times for business-to-business transactions. An April inquiry by her office found small businesses were being used as a form of “cheap finance” by their larger peers, with extended payment terms of 45, 60, 90 and 120 days not uncommon. Nearly half of small businesses had more than $20,000 owing to them in late payments, the inquiry found. Greens Senator Nick McKim is drafting legislation that would require payment within 30 days to small businesses where a contract is entered into between a business with $10 million or less annual turnover and a big business of $25 million or more annual turnover, or a government agency. It’s worth noting that historically, payment times tend to shorten in July and remain at roughy that level the following month. Xero Small Business Insights expects to have figures for the month of August in early October. Stay tuned!
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 3 of 22 Rob Bazzani 01 Late payments improving but could 10.09.2017 be better I live and breathe small business and derive great satisfaction in advising clients in the mid-market. Small business is the powerhouse of the Australian economy, contributing approximately 20 percent to GDP. Founders of SMEs are often innovative visionaries who are not afraid to take risks. I have enormous respect for the way they develop what started out as a dream, a hobby or part-time project into a flourishing enterprise. Cash flow has always been a significant problem to smaller enterprises, and late payments have had consistent negative impact. Xero Small Business Insights released today, however, gives some cause for optimism, as the trend towards late payments appears to be decreasing. The average number of days for small businesses to be paid
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 4 of 22 (based on 30-day invoice terms) was 36.2 in June, according to anonymised, aggregated figures drawn from Xero’s subscriber base. This is down from the same time last year, when nearly 40 days was the average. Over the longer term, there are regional variations. The ACT pays the quickest, with average payments over the past three years occurring at 31.2 days; South Australia is the slowest, with payments taking 38.2 days. Not only do late payments squeeze smaller companies so tightly that many will not survive, but they illustrate a particularly insidious form of power play. The Australian Small Business and Family Enterprise Ombudsman has cited recent statistics indicating just 12 percent of large ASX-listed companies are paying bills on time, compared to 34 percent of non-listed businesses. The commercial and psychological imbalance of power between larger companies putting pressure on smaller ones, which have little or no recourse in such situations, is a well-known phenomenon. Many small enterprises just cannot cope with a lack of cash flow, especially if they lack stable and reliable sources of capital. Late payments diminish working capital and ultimately profitability, and increase anxiety and stress for business owners. It also creates a poor business environment, making it difficult for the mid- market to thrive. What can SMEs do in such a situation? The first thing is to obtain the right advice on how to manage their circumstances, not only from a legal perspective but more pragmatically from a commercial standpoint. They need to resolve how to manage cash flow implications; where to source alternative forms of capital; where value can be locked into the business and how it can be liberated; and in the worst-case scenario, how to stave off insolvency. With the right strategies in place, late payments need not sound the death- knell for an enterprise. Hopefully, a paradigm shift in the attitude of big business towards the mid-market will also follow, which will greatly add to small businesses’ longevity and their contribution to the Australian economy.
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 5 of 22 Demian McLean 02 Hammers, nails and high tech: Why 06.09.2017 tradies turn to Xero What does a typical small-business owner look like on Xero? The Cloud adoption picture is a diverse one. They could be swinging a hammer, working in a kitchen, or hanging out of a helicopter to take photos. Together, they 31.0 % create a mosaic of professions that comprise Xero’s 500,000 growth in Australian subscribers on subscribers. Xero in the year through 31 March 2018 Just as their professions vary, some Australian industries are adopting cloud-based accounting software faster than others. In the year through March 2017, construction posted the biggest gain, generating 33% of all new Xero subscribers. That boom echoes a trend in the broader economy. Construction spawned more new businesses than any other segment for the year to the end of June 2016, according to ABS figures. There were almost 60,000 business
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 6 of 22 entries – – a 17 percent jump — fueled by domestic building in capital cities. Adam Clarke, owner of Prompt Roofing just outside Perth, says there’s more business than he can handle. That’s why he turned to Xero two years ago, in an effort to create time for customers. “Xero saves me an incredible amount of time,” Clarke says. “It tells me where I stand financially in an instant – what I own, how much I owe, and what bills I’ve paid. That’s hours of paperwork I don’t need to do every week.” His seven employees enter their hours into the Xero app on their phone, which then gets picked up by Xero payroll. That in turn lightens the load on Clarke’s bookkeeper. Prompt Roofing uses Xero in combination with the app ServiceM8. The Xero-integrated app creates customer files that contain all the info from the original contact, the job details and the e-mail chain. And the financials flow into Xero for easy reconciliation. While construction leads the list of industries adopting Xero, retail is also a standout. The sector generated 15% of new Xero customers in the year to the end of March 2017. In the broader economy, retail saw the number of new businesses rise 13 percent, according to ABS figures for the year to mid-2016. Aquabumps, an outdoor photography business based in Sydney’s Bondi Beach, explains part of Xero’s appeal for retailers: daily bank feeds and easy ways for customers to pay. “We take payments in many ways – Eway, Paypal, Tyro, Amex and cash – and it’s so easy to match the payment to the transaction when the bank
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 7 of 22 feeds are right there in Xero,” says Debbie Tan of Aquabumps. “Xero even suggests a match, saving so much time. Our bookkeeping fees have come down since we moved from MYOB to Xero.” Debbie’s husband, Eugene “Uge” Tan, frequently takes shots from a helicopter above Bondi, where he’s captured some of his most famous images. When back in the office, Eugene turns to some of the apps that connect to Xero. For rostering and timesheets, he uses Deputy. The cloud-based app syncs with Xero and sends all timesheets directly to the accounting software. A gallery manager then approves the timesheets, and they go straight to the bookkeeper in Xero for payment and confirmation. “We formerly used spreadsheets and paper, which were always getting lost and were inaccurate,” says Uge. “We also send all of our online store orders – taken through WooCommerce – directly into Xero for reconciliation. It’s a pretty cool thing. Makes life so much easier.” Further south in Melbourne, retailer Kjetil Hansen used Xero and its connected apps to help win an appearance on the TV show “Shark Tank.” He walked away this year with a pledge for $300,000 to expand Deliciou, his line of bacon-flavoured seasoning. “I started using Xero because it integrates seamlessly with the app Shopify and makes accounting simple,” says Kjetil. “For an ecommerce store owner, it’s critical to understand the numbers, and Xero makes it easy to keep on top of them. I can process payroll for multiple staff in under five minutes and reconcile bank transactions in just a few clicks.
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 8 of 22 Erin Smith 03 Small businesses on handling late 06.09.2017 payments Late payments. Two words that have the power to unsettle most business owners – sometimes even to the point of insolvency. So why is it that late payments are still so pervasive in the small business landscape, and what is being done to address this issue? We gathered together, in one room, four fearless small business leaders, who represented a range of industries and business models across the small business spectrum. By combining their anecdotal insights with Xero’s anonymised real-time data from hundreds of thousands of small businesses, we laid bare the late payment landscape in a very frank and honest discussion. Who’s who?
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 9 of 22 Meet the four founding members of Xero’s small business advisory panel. High-profile digital media advisor Mandi Gunsberger, who runs the nationwide digital publishing company Babyology. James Begley, founder of Pickstar, the uber of sports celebrity speaker engagements. Pippa Oostergetel of Squeak, a retail business specialising in digitally printed scarves, and recent recipient of Xero’s Cloud Street package Mark Lawry, a data-driven partner at Suntax accounting firm in Melbourne. Where do each of you stand when it comes to late payments? Mandi, Founder and CEO of Babyology: The early days were amazing for us at Babyology, because our business model was largely based on requiring prepayments – and the amounts were much smaller. But the ball has shifted as we’ve grown over the past 10 years. Payment is now on a much larger scale, and it’s the creative agencies who set the terms– which can mean a 30, 60 or 90-day turnaround. Pippa, CEO of Squeak: My customers now pay upfront, so I avoid late payments this way. A lot of them initially said, ‘We don’t work that way’, so I had to make a gut decision about how badly I wanted their business. I pretty much just started making prepayments part of my terms and conditions. Now I wait to get paid for the product before I send it out in the post. That means I do have orders that don’t get filled. I’ll hold that stuff for two weeks – and if I don’t get paid in the two weeks, then it goes out to somebody else. James, founder of Pickstar: It’s very hard, very hard, to get money in, as a lot of the big agencies we work with pay 30 or 60 days late. Even then, we’re lucky if they pay us at this point. That of course affects our ability to pay our suppliers on time. The way it works in publishing or media is that we might be booking something today, but we only see the money in four or five months. We need to have offset accounts in place to counteract the payment lag. Xero’s data from over 1000 small businesses shows that the longest delays in invoice payments are over December, with cash flow at an annual low in January. What do you wish you knew about late payments before you started your business? James of Pickstar: I wish I had known about the inevitable summer downtime. When I started, business was quiet in December. I worried
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 10 of 22 about it, wondering if I had got my model all wrong. Then it happened again the next year, and it wasn’t until year three that I realised I’d need an annual buffer to cover this period. So you learn to batten down the hatches. Business effectively closes in Australia from December through to Australia Day – so you better have a late payment buffer in place for any invoices you send during this time. Mark of Suntax: I always tell my accounting clients, if you don’t get your invoices in by 11 December each year, there’s a good chance you won’t be paid till February. I wish more small businesses understood this. James of Pickstar: I agree. In fact now I just work extra hard before December, as I know I won’t get paid for months unless I get those invoices in before December hits. Who do you think is slowest when it comes to paying? Small or big business? Mark of Suntax: For us, it’s small business clients who are generally slow to pay. To be honest, we know their situation anyway, given we are their accountants. We know that a lot of small businesses aren’t generally cashed up, so they’re the ones that tend to be slower at paying. James of Pickstar: I have to agree and say that most of the bigger companies have good systems in place and seem to be pretty good at paying us – whereas the smaller businesses may delay payment. We’re the first to put our hands up here, as we haven’t always paid everyone on time. But we’re not talking about hundreds of thousands of dollars in our case, so the delay doesn’t seem to be as big of an issue for us and our suppliers – perhaps when compared to other companies. Pippa of Squeak: I’m not at the stage where I’ve dealt with a big business, so for me, it’s usually the smallest stores that struggle to pay me on time. These are the stores that want the stock to sell, but haven’t got the money to buy it. I get this, but it means wholesale isn’t as viable for my business, when compared to retail. Mandi: For us, the larger clients we work with can sometimes pay their invoices late, which can be stressful. Especially when you’re waiting on large payments, and salaries need to be paid. We try to have a cash buffer of three months minimum in place to avoid the deficit. But we can never afford to take our eye off the ball, as that buffer can go quickly. What do you think lies at the heart of the late payments issue?
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 11 of 22 Mandi of Babyology: I think that small businesses need more support to help them with their own supplier payments. We’re now technically a medium-sized business, yet we still struggle for financial support some 10 years down the line. We’ve gone to all the banks for funding to help with cash flow but we have been more successful with other funding, and not the traditional institutions. Cash flow can be a challenge. Sometimes, it requires us to seek external investment elsewhere to support our own outgoings. James of Pickstar: I like the idea of the government mandating payments to 30 days across both small and big business. So, while we’d be required to pay suppliers in 30 days, we could generally do that if our clients were likewise mandated to pay us within the same time period. Mark of Suntax: I think big business like Coles and Telstra vowing to pay within 30 days as of 1 July 2017 has really helped send a message out there to other big businesses. James of Pickstar: And I think there’s a need for the small business owner to be able to compartmentalise their seasonal payments as well. For example, we sometimes get paid for talent fees nine months before an event, but we know to put that in an offset account and keep it separate. It’s not our money until the project is completed. Otherwise upfront payments can cause nearly as many headaches as late payments – they can become a liability. Did you know? Xero Small Business Insights provides a snapshot of the sector’s health, updated monthly. Its metrics are based on anonymised, aggregated data drawn from hundreds of thousands of our subscribers. The result is a close-up view of business conditions across hundreds of thousands of businesses. Xero’s real-time data unlocked the following insights as of June 2017. The average small business is paid in 36 days Just 52% of business owners were cash flow positive as of June 2017 46 percent of the invoices issued in the past year were paid late. Given Xero has one of the richest data sets into small businesses in Australia, it has unique insights into the challenges that small businesses are facing. By using this dataset to change the mindsets of businesses, big
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 12 of 22 and small, and government, Xero can help to make the lives of small businesses better.
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 13 of 22 Erin Smith 04 The top ve concerns facing the 06.09.2017 construction industry Like many industries, the construction industry – commercial and residential sectors alike – is going through a period of enormous change. We speak to three professionals to delve deeper into the issues in the here and now, and those on the horizon. Concern 1: Resourcing is at a premium Clinton Lloyd, co-founder of family-owned commercial construction firm, Lloyd Group, says resourcing can be tough, and innovation is more important than ever. “Everyone’s looking for blue collar and white collar staff,” he says. “Now it’s more about being smarter with how we approach recruitment, given our
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 14 of 22 resourcing needs can fluctuate rapidly. “We’re looking at a few different social media platforms as a way to promote our opportunities and avoid agency fees by connecting directly to talent pools online. That means we require clear brand positioning and strong marketing capabilities, so the areas of recruitment, marketing and brand positioning feed into each other more than ever.” Philip Moreton of Philip Moreton Bricklaying has been working in the industry for over 20 years, and shares a similar view when it comes to skilled staff being hard to secure. “It’s hard to find good staff and while I’m keen to take on apprentices, they often don’t want to lift a shovel in 40- degree heat. Not many apprentices seem to want to have a good crack at bricklaying these days – in my experience at least.” Dean Ipaviz, co-founder of Sydney-based residential construction firm VerdeCon, also encourages building firms to promote engagement from within to retain good talent, whether contract or permanent staff. “Staff engagement is really important to us. We place a big emphasis on making sure we look after our team,” Dean says. “We’ve put a project- based profit share opportunity on the table with our supervisors, and we run quarterly out-of-hours meetings with the team to ask what is and isn’t working, and how we can fix any problems we’ve discovered. Then we make sure we set and revisit company goals to promote inclusiveness, and make the guys feel part of what we‘re trying to achieve. “We want them to grow with the company, feel valued, and be very much a part of what we’re doing and where we’re going.” Dean also reasons that staff engagement needs to be values driven. “When we meet carpenters onsite who share our values, we make a point of trying to show them what we’re about and where we want to go. It’s so important to have a point of difference in the current climate for your business. By working with team members who carry the same ethos, it means we move the handover goal posts of every project that little bit closer. “I think this shift towards prioritising higher engagement is the start of a new chapter for the whole industry – especially as a way to tackle the trade shortage head on.“ Concern 2: Technology is shifting fast While Clinton embraces technology platforms, he believes this shift will take time to integrate industry-wide.
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 15 of 22 “Unfortunately our industry has been comparatively slow to adopt technology,” Clinton says. “And yet now so many software companies are entering the industry to offer different services – everything from document management to safety measures. “Take document management, for instance. It’s so much more efficient to have everything stored and distributed electronically. But there’s an adjustment – some guys are fresh out of uni and love it, while others are less enthusiastic to these changes.” Technology can also impact your choice of materials, says Philip, who cites cost-cutting as a motivator for the switch. “We often have to use a new product for cost reasons, yet we may not enjoy working with it as much compared to traditional bricks. But now a client has to pay more to opt for traditional bricks, and most of the time they’re not even given the option – so the new product prevails to save money.” Concern 3: The rise of modular constructions Both Clinton and Dean agree a shift towards modular constructions is being experienced at different rates across residential and commercial building sectors. Clinton says the commercial sector is slower to embrace this shift because bespoke building design is inherent to any strong brand, but he sees its impact on the horizon. “The amount of automation in the next five to ten years is increasing significantly, as seen through the increase in modular buildings and
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 16 of 22 bathrooms for example. I can’t see that changing in the near future in the commercial sector, but I can see it happening in the residential sector. “It will start to be introduced more and more in the next five years, and it will reduce labour costs which are so high at the moment, particularly in Australia.” Dean raises an interesting question about modular residential constructions being erected in city versus regional locations. “Automation is very real, and like it or not, it’s going to impact our industry. Dropping a modular prefabricated house on a block of land in a regional area where you have the space certainly doesn’t pose the same complexities as attempting to do the same thing in the eastern suburbs of Sydney. The savings made in prefabrication are then lost to labour, equipment and permits during the install.” Dean also draws a connection between workforce opportunities and the relative affordability of a more cost-effective installation process in regional areas. “With modular building being more cost effective in regional locations than city locations, it may be the impetus that regional kids need to be encouraged to stay local. Whereas now, kids in rural areas are flocking to cities like never before – locking them in to learn a trade is becoming harder and harder. “But someone has to put these prefabricated houses together; there’s a business and a decent living to be made doing it. When someone comes up with a modular style production line that allows quicker builds and more cost-effective housing in rural areas, you can only hope it will open up more regional opportunities.” On the flip side, while the rise of modular constructions doesn’t directly shape Philip’s experience, he says a similar shift is happening in bricklaying. “Precast concrete panels made offsite are taking a lot of work off bricklayers, which is a threat to our industry. “People are adapting to this though – my brother in law, who was a bricklayer, has switched to doing the concrete panels.” Concern 4: Bigger barriers to entry Both Dean and Clinton say that the barriers to entry are increasing in construction, with potential knock-on effects for the building industry in
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 17 of 22 Australia. Dean wishes there was a better way forward when it comes to insurance premiums in NSW. “The old ‘homeowners warranty’ scheme in NSW is broken,” he says. “It’s now known as iCare HBCF (Home Building Compensation Fund), and it’s been handed back to the private sector. This means all residential builders’ premiums have increased, with small proprietary limited companies being the ones to bear the brunt. “This cost is passed onto the consumer, which inflates pricing as soon as we pick up a set of plans.” The skills shortage compounds this issue, says Dean – who adds that incentives for an experienced tradesperson to want to set up their own business are low. “If you couple the high premiums in NSW with the start of the skills shortage we’re seeing, you start to pull at a string that has a very tightly woven ball behind it,” he explains. “In essence, despite having worked in the industry for over a decade and having been through the rigmarole of obtaining my license, we as a company are being penalised for the mistakes of previous builders. It’s just not right.” Incentives are key to opening up opportunities within construction, he believes. “There should definitely be more incentives for young builders looking to get in the game. While I understand the real risks involved with our industry, they can be minimised by the vetting processes when obtaining your license and proving you’re qualified. “It doesn’t need to be about penalising the people who have the runs on the board, and are looking to start a new business.” Clinton raises the issue of bank fees as another barrier. “The banks are being more conservative and demanding in terms of the security we’re putting up, and with regard to their terms. Bank fees have definitely increased compared to say two years ago. This is a bit of a concern but every builder learns to deal with it. “That said, less established builders may find the barriers to entry tougher as a result.”
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 18 of 22 Concern 5: Stepping up to sustainability Clinton and Dean are proudly outspoken about the fact that the future of construction needs to be more sustainable, or at least environmentally responsible – for the sake of the environment as much as cost-cutting measures. Waste is a big part of this issue they say, and it can be improved. ”A lot of waste is generated by people not ordering the right quantities of material,” says Clinton. “So we’re looking at how people can measure more accurately up front and reduce the cost of waste all around.” They both emphasise the need for more conscious construction decisions. “We’re living in this consumption-based society,” says Dean. “Now, instead of taking 10 minutes to sharpen a chisel onsite like I would have done 10 years ago, we just buy a new chisel, hand saw or blade. “Everyone is so time poor. These days everything in our industry needs to be done faster and needs to cost less, and this has a massive impact on the environment.” They agree that the key to the future of construction is about being environmentally responsible – but also realistic. “The building industry as a whole – from sourcing raw materials, through to production, procurement, delivery, installation and removal – is one of the biggest contributors to global warming. The embedded energy and carbon in all building materials is huge,” Dean says.
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 19 of 22 “As a business, we’re a long way away from being sustainable, but it’s definitely one of our goals. We make every effort to be more responsible in our choice of building materials, tools and waste disposal. In doing this, we actually save money for ourselves and our clients. “It’s about people – in the industry as well as homeowners and clients – becoming aware and wanting to change. Meet…. Dean Ipaviz – Dean is co-founder of VerdeCon alongside Matt Baker. Together they lead a team of six carpenters who work mostly on residential renovations across the eastern seaboard of Australia. Clinton Lloyd – Clinton is co-founder of the Lloyd Group in partnership with his brother, Dustin Lloyd. This family-run business specialises in bespoke commercial constructions throughout Melbourne and the eastern seaboard of Australia. Philip Moreton – Philip is a sub contractor bricklayer who works on commercial and residential developments. He’s been in the industry for over 20 years and is based in Perth
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 20 of 22 Demian McLean 05 Going global: How small businesses 06.09.2017 trade overseas When one thinks of Australian goods sold overseas, products such as iron, natural gas and beef are likely to spring to mind. But beneath the commodities story lies another sector that is increasingly compelling: small businesses trading globally. The change in total dollar value of imports and exports has trended upward in the past year for Australian small businesses, based on Xero data. It grew 27 percent month-on-month in May — the most in over two years — before slipping 2.6 percent in June. When breaking down the numbers, it’s evident total import values have tended to climb faster than that of exports. Export values rose 15 percent in May, setting a nine-month high, and were little changed in June.
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 21 of 22 The small business figures provide a contrast to broader Australia. ABS figures show export volumes rose 2.7% during the three months to June, almost twice the pace of import volumes. Outbound shipments were helped by stronger demand for iron ore, natural gas and non-rural goods, according to the Australian Associated Press. James Cashat owns SHOC, a Melbourne-based small business that trades almost entirely overseas. It makes optical visors for US football and lacrosse helmets. NFL stars including the Oakland Raiders’ Marshawn Lynch and the Washington Redskins’ Terrelle Pryor wear the iridescent visors. More than 90 percent of SHOC’s customers are in America, which means Cashat’s revenue arrives in US dollars. His suppliers also request payment in US currency. That’s one of the reasons his accountants at Suntax suggested he use Xero. “Paying in Australian dollars is dangerous because of the exchange-rate fluctuations,” says Cashat. “Xero’s currency function constantly updates the exchange rate, and the changes are reflected in my financial position. I know exactly what I’m making in Aussie dollars. Xero is set up to give small businesses many of the same benefits that large enterprises enjoy in trading globally. Xero’s multi-currency function has exchange rates for over 160 currencies that are updated every hour from XE.com. Small businesses can set up accounts, run reports, invoice customers, and take payments in foreign currencies. “Sales transactions come through, and I sit there in my spare time and reconcile them on my phone with Xero – bang, bang, bang! Easy,” says Cashat, whose business is in its fourth year.
Small Business Insights September Reporting period: Jul 1, 2016 - Jul 31, 2018 Page 22 of 22 A foreign-currency summary report shows an overview of FX exposure along with realized gains and losses, and bank account revaluations. This takes away complicated reconciliations and exchange-rate guesswork. Cloth Concepts is a fabric-development company based in Alexandria, New South Wales. It serves fashion designers and labels in Australia and abroad, and employs seven people. About a third of its business is delivering to overseas locations such as factories in China. “Pricing is one of our biggest challenges, and that’s significantly affected by the fluctuation of the Australian and U.S. dollars,” says Director Parry Laxman. Cloth Concepts uses currency forecasts and some hedging, and relies on Xero’s multi-currency accounting tools for a real-time picture. The software converts foreign transactions into local currency and updates exchange rates hourly, offering instant insight into how currency gains or losses are impacting cash flow. “We also just switched over to NAB banking, which has been really helpful. We’re getting bank feeds and transparency on the currencies we deal with,” says Laxman.
You can also read
NEXT SLIDES ... Cancel