Big politics won’t help small business
With the election campaign in full swing, one thing everyone agrees on are the usual levers to boost small business, from access to capital and skills to tax cuts, reducing red tape and overcoming late payment times. Although crucial to the economy, this segment has been historically resistant to politicking and government policy and hard to pin down due to its size, spread and diversity. Yet most small businesses in Australia have two things in common – they interact with government services, particularly the ATO, and they rely on trusted advisers.
Drawing on both of these connections provides a way to help small businesses take their place at the heart of a modernised economy, not through big politics but by a series of nudges. Central to achieving this is promoting more use of digital technology. Going digital saves small businesses time, provides flexibility to work almost anywhere, and allows them to reach new customers and markets, with flow-on effects for the whole economy. Our research shows that among businesses on Xero, those in mature NBN regions grew employment by one-third more and revenue by two-thirds more than peers in non-NBN regions. We saw even greater effects with employment and revenue growth when businesses used apps for tasks such as employee rostering.
In Australia, despite a strongly emerging technology infrastructure based on the NBN and in the future 5G, small business is facing a two-speed economy defined by those that embrace digital tools and those that don’t. Step forward the ATO which is about to stimulate one of the most significant waves of technology adoption ever experienced by the small business community. Starting on 1 July, its Single Touch Payroll initiative will require all small business owners to use software to report pay-run details each time they pay employees. Gone are the days of filing these details on paper once a year.
Even though this seems a simple measure, it will see many businesses use a technology-based approach for the first time. From this apparently small beginning, more digital reporting from businesses seems likely given the ATO’s stated goal of boosting the number of items that are prefilled on tax returns. In the ATO’s own words, having data already loaded will help “spot risk in the business environment and enhance education and compliance in areas such as the black economy and ‘phoenixing’, by making it easy to get things right and hard not to.”
The ATO is providing a clear example of the benefits of the digitisation of government services, which leads to the question of what more can be done? Deploying a common e-invoicing standard for both Australia and New Zealand would be an excellent start. Late payments are the scourge of small business, hurting cash flow and damping employment. PWC has identified the benefits of the government adopting a comprehensive digital strategy that creates simple, cross-agency experiences tailored for different stages of a business’s life.
For small business owners, a realistic outcome of a long term government digital strategy could be driving their business from a comprehensive software dashboard plugged into their real-time data. Codified legislation could notify business owners of regulations, or alert them to grants or initiatives they are eligible for, and even prefill some application fields. Integrating rich government data for benchmarking capabilities could be enabled to inform everyday business decisions on everything from hiring to lending and industrial relations. A bold government digital strategy could allow businesses to automatically navigate a complex regulatory and industrial relations environment while bolstering protection for business, consumers and employees.
It is also the ATO that brings us to the next measure that can be actively deployed to boost small business innovation – the potential for trusted advisors to act as technology champions. Due to Australia’s complex tax system, we have a highly developed network of Trusted Advisers to small business, with our research showing that 77 percent of business owners use at least one accountant or bookkeeper. The Bouris Small Business Digital Taskforce Report stated that when it comes to digital advice, owners are “suspicious” of technology companies and don’t naturally turn to government. They prefer instead to consult a trusted adviser, specifically their accountant.
It is a very positive relationship with a study we made in our UK market finding that businesses with an accountant grew net profit as much as 23 percent faster than those without one. Accountants and bookkeepers are the secret sauce in fostering technology adoption and awareness, reaching the small businesses in a way that no-one else can. They will be a critical partner in supporting productivity and economic growth in a future economy, and a vital communications channel to help government drive their own digitisation agenda. The trusted adviser community has an opportunity to lean into this role and further equip themselves to consult to small business beyond ensuring compliance. With today’s software, both the adviser and client see the same data in real-time. This opens the door to services such as continuous cash-flow forecasting, inventory management and expedited lending.
It seems that the only two sure things in life for small businesses are taxes and their trusted advisers. As we look past the election, we hope to see more initiatives that nudge small businesses to embrace digital. As goes small business, so goes Australia.
Source: Xero Blog