With the new year upon us, indicators are pointing to 2020 being one of the biggest years on record for small businesses. Opportunity abounds for small business, and the wellbeing of our nation’s economy hinges on the sector’s ability to thrive, writes Xero’s small business advocate Angus Capel.
Here are the small business trends to keep an eye on in 2020:
1. e-Invoicing is finally here
e-Invoicing is going to revolutionise invoicing this year. It will allow invoices to be digitally exchanged from business software to business software, regardless of the system being used.
If you’re a supplier to the federal government or state governments including SA or NSW, once up and running e-Invoicing will mean you’ll no longer have to submit paper-based or PDF invoices. If you’re a purchaser, it will end the need to manually key in invoice details and enable you to efficiently track open invoices and payments.
Not only will this help to reduce human error, it will significantly speed up the payment process.
In fact, e-invoicing is the technology that underpins the federal and NSW government’s commitment to pay invoices under $1 million in five days. Expect the government to strongly encourage any big business with a small business in its supply chain to be an early adopter.
2. Getting paid on time
On a similar note, this year should also bring continued reductions in late payments from big business to small business. Last year, Xero Small Business Insights found small businesses were still waiting over 33 days on average to be paid. We did see promising shifts in this timeframe, including a nearly 2.5-day decline in late payment times in July across Australia. This was the biggest June to July drop in three years.
The federal and NSW government commitments on e-invoicing will certainly help, but there are other factors to watch too. The establishment of the Payment Times Register is also set to increase the transparency of big business payment times.
3. Improved access to finance
This year will see a greater use of data to ease the process of applying for a small business loan. Open banking, coupled with the government’s $2 billion Australian Business Securitisation Fund, is set to encourage competition and bring a wave of new entrants, which should offer greater access to finance for small businesses and better rates.
This means more small business owners will be able to apply for unsecured financing from a lender based on their credit history, without having to pledge their home as collateral.
Many business owners say that onerous documentation and other requirements of loan applications are the biggest impediments to applying for finance. However, with greater integration between companies like Xero and major banks in 2020, it will be easier than ever for business owners to do away with paperwork and apply for finance in just minutes.
4. Single Touch Payroll shows its worth
The implementation of Single Touch Payroll (STP) last year was the initial hurdle, but there’s plenty of the STP race yet to run in 2020. This year, the ATO will begin implementing its next phase in streamlining compliance for small business employers.
If your business is already STP compliant, you won’t have to change a thing, but you and your adviser may start to notice more pre-filled tax fields on quarterly BAS reports and tax returns as the next phase rolls out. Tax file number declarations may be further simplified or deemed unnecessary.
Don’t forget to keep in mind the key compliance deadlines for STP this year too. The ATO will be able to impose fines from April, with a final deadline in June.
5. Year of the side hustle
Despite 2019 ending with a set of broader economic challenges, starting and growing a business using technology has never been easier. This means that 2020 could be the year of rapid business growth led by technology-enabled side hustles.
Whether it’s delivering food on your bike or starting the next tech revolution in your garage, ventures that were initially intended to augment salaries or subsidise unsatisfactory wages have the potential to grow into much more. This would bring more budding entrepreneurs’ ideas to market, which is beneficial to the economy and to be encouraged at all costs. This trend is likely to boost innovation across the country and change our culture towards fully embracing the potential of startups.
6. The engine changing gear
Small businesses are often referred to as the ‘engine room’ or ‘backbone’ of the economy – and in 2020, this will be truer than ever. With employment, wages and GDP flatlining, the economy needs a jolt to get moving. Embracing e-invoicing, fixing late payments, cutting red tape and enabling better access to finance are initiatives that will improve productivity and help small businesses to produce more without increasing inputs.
As productivity improves, the extra profit created can be reinvested to increase output and put upward pressure on employment, wages and economic growth. In short, what’s good for small business is good for the economy.
And finally, these improvements to the operational aspects of small business begin to pave the way for more ideas to be taken to market and presented to the world through technology. 2020 is going to be the year for small business and we look forward to supporting the sector’s success.
Check out these stories to discover more trends to watch out for in 2020