Late payments hit 3-year low as pledges from big business kick in - Xero

Late payments hit 3-year low as pledges from big business kick in - Xero
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.
Late payments hit 3-year low as pledges from big business kick in - Xero
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!
Late payments hit 3-year low as pledges from big business kick in - Xero
Small Business Insights

September                                                            Reporting period: Jul 1, 2016 - Jul 31, 2018   Page 3 of 22

                 Rob Bazzani

01               Late payments improving but could
                 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
Late payments hit 3-year low as pledges from big business kick in - Xero
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

        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

        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
Late payments hit 3-year low as pledges from big business kick in - Xero
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
                 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
                 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
Late payments hit 3-year low as pledges from big business kick in - Xero
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

        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

        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

        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
Late payments hit 3-year low as pledges from big business kick in - Xero
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

        “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.
Late payments hit 3-year low as pledges from big business kick in - Xero
Small Business Insights

September                                                           Reporting period: Jul 1, 2016 - Jul 31, 2018   Page 8 of 22

                 Erin Smith

03               Small businesses on handling late

                 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?
Late payments hit 3-year low as pledges from big business kick in - Xero
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

        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

        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
                 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

        “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.
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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
        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
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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

        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

        “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
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September                                                    Reporting period: Jul 1, 2016 - Jul 31, 2018   Page 17 of 22


        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.”
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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

        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.
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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.


            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
                 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

        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 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

        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.
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