1 00:00:03,960 --> 00:00:06,750 Sean Aylmer: Welcome to the Fear and Greed Business Interview. I'm Sean Aylmer. 2 00:00:06,960 --> 00:00:10,499 Sean Aylmer: Small businesses in Australia are pretty resilient. They've had no 3 00:00:10,500 --> 00:00:13,170 Sean Aylmer: choice really, the last few years, they've thrown pretty much 4 00:00:13,170 --> 00:00:15,690 Sean Aylmer: everything at them. Today I want to get an idea 5 00:00:15,690 --> 00:00:19,229 Sean Aylmer: of the pressure SMEs in this country are facing, but 6 00:00:19,230 --> 00:00:22,710 Sean Aylmer: also what lies ahead and where the opportunities are. Joseph 7 00:00:22,710 --> 00:00:26,428 Sean Aylmer: Lyons is Xero's Managing Director Asia Pacific and Louise Southall 8 00:00:26,428 --> 00:00:29,969 Sean Aylmer: is Xero's Economist. They've both been appearing at Xerocon in 9 00:00:29,969 --> 00:00:33,239 Sean Aylmer: Sydney this week, which is a great supporter of this podcast. Joe, Louise, 10 00:00:33,240 --> 00:00:34,260 Sean Aylmer: welcome to Fear and Greed. 11 00:00:34,590 --> 00:00:35,159 Joseph Lyons: Good morning. 12 00:00:35,459 --> 00:00:36,180 Louise Southall: Great to be here. 13 00:00:36,870 --> 00:00:39,240 Sean Aylmer: Louise, let's start with you. You have access to the Xero 14 00:00:39,240 --> 00:00:42,750 Sean Aylmer: Small Business Index, which tracks changes in the performance of 15 00:00:42,750 --> 00:00:46,080 Sean Aylmer: small businesses from month to month. What's the current state 16 00:00:46,080 --> 00:00:46,560 Sean Aylmer: of play? 17 00:00:47,519 --> 00:00:50,519 Louise Southall: Yeah. You used the word resilience in your introduction there, 18 00:00:50,519 --> 00:00:53,430 Louise Southall: and I think that's a really good summary of how small businesses 19 00:00:53,430 --> 00:00:56,130 Louise Southall: in Australia are going. I mean, they're facing a lot 20 00:00:56,130 --> 00:01:00,180 Louise Southall: of headwinds at the moment. High inflation, and as a 21 00:01:00,180 --> 00:01:03,540 Louise Southall: result, higher interest rates. They're also still finding it difficult 22 00:01:03,540 --> 00:01:08,280 Louise Southall: to find staff and growth is coming off unsurprisingly, as 23 00:01:08,280 --> 00:01:11,369 Louise Southall: households deal with those cost of living pressures. So they're 24 00:01:11,520 --> 00:01:15,060 Louise Southall: dealing with a lot, but actually Xero Small Business Insights 25 00:01:15,060 --> 00:01:19,620 Louise Southall: data shows that overall small businesses are performing just a 26 00:01:19,620 --> 00:01:21,719 Louise Southall: little bit above the long- term average we have for 27 00:01:21,719 --> 00:01:26,459 Louise Southall: that index. So in particular, sales growth is holding around 28 00:01:26,459 --> 00:01:29,400 Louise Southall: the long- term average and we're seeing certainly in those 29 00:01:29,910 --> 00:01:33,780 Louise Southall: industries that don't depend on household spending, like construction, for 30 00:01:33,780 --> 00:01:37,289 Louise Southall: example, are holding out pretty well. Which is great to see. 31 00:01:37,680 --> 00:01:39,869 Sean Aylmer: Is that a bit of a surprise? Because we've been 32 00:01:40,170 --> 00:01:42,539 Sean Aylmer: predicting a recession now for about 12 months, certainly in 33 00:01:42,539 --> 00:01:45,299 Sean Aylmer: the US and Europe and probably in Australia, and we 34 00:01:45,299 --> 00:01:48,419 Sean Aylmer: just don't seem to be getting there. And small business is a 35 00:01:48,420 --> 00:01:51,720 Sean Aylmer: great barometer of how the economy's going. It just doesn't 36 00:01:51,720 --> 00:01:53,700 Sean Aylmer: seem quite as tough as we thought it might be. 37 00:01:54,840 --> 00:01:58,440 Louise Southall: Yeah. I think it's always worth remembering that our data 38 00:01:58,440 --> 00:02:02,070 Louise Southall: is an aggregation, so it is the average of what's 39 00:02:02,070 --> 00:02:04,860 Louise Southall: happening. And there will definitely be businesses out there that 40 00:02:05,340 --> 00:02:09,060 Louise Southall: are finding it really difficult, particularly those businesses that depend 41 00:02:09,060 --> 00:02:13,560 Louise Southall: on household spending. So I'm thinking hospitality, retail, those sorts 42 00:02:13,560 --> 00:02:17,309 Louise Southall: of businesses. But I think what's helping the situation is 43 00:02:17,309 --> 00:02:20,549 Louise Southall: that our unemployment rate is staying low. And so if 44 00:02:20,549 --> 00:02:24,569 Louise Southall: people have a job that really does help protect small 45 00:02:24,600 --> 00:02:27,270 Louise Southall: businesses from some of the buffers. And I think that's 46 00:02:28,320 --> 00:02:30,810 Louise Southall: certainly one of the main reasons why the economy is 47 00:02:30,810 --> 00:02:33,210 Louise Southall: performing probably better than, like you say, a lot of 48 00:02:33,210 --> 00:02:34,138 Louise Southall: people expected. 49 00:02:34,770 --> 00:02:37,500 Sean Aylmer: Is there any specific factor or a couple of factors, 50 00:02:37,500 --> 00:02:41,428 Sean Aylmer: be it supply chain, rising interest rates, inflation, tight labour market, 51 00:02:41,430 --> 00:02:44,130 Sean Aylmer: those sorts of things, that are particularly tough for small 52 00:02:44,130 --> 00:02:47,040 Sean Aylmer: businesses or affecting them disproportionately at the moment? 53 00:02:48,180 --> 00:02:51,119 Louise Southall: Yeah, all those factors are impacting them. One of the 54 00:02:51,120 --> 00:02:55,770 Louise Southall: things that I think people sometimes don't appreciate about that 55 00:02:55,770 --> 00:02:59,970 Louise Southall: combination of low growth and high inflation, it really does 56 00:03:00,090 --> 00:03:03,060 Louise Southall: make it difficult for small businesses because they're in a 57 00:03:03,060 --> 00:03:06,720 Louise Southall: situation where their own costs are going up, so they 58 00:03:06,720 --> 00:03:09,510 Louise Southall: need to cover those costs in order to stay profitable. 59 00:03:09,840 --> 00:03:11,639 Louise Southall: But at the same time, if you're in a low 60 00:03:11,639 --> 00:03:14,820 Louise Southall: growth environment and you've got some nervous customers out there, 61 00:03:15,419 --> 00:03:17,699 Louise Southall: then it's very difficult to raise your prices by too 62 00:03:17,699 --> 00:03:22,020 Louise Southall: much because you risk damaging your customer base. So I 63 00:03:22,020 --> 00:03:24,840 Louise Southall: think sometimes we do obviously have a lot of focus 64 00:03:24,840 --> 00:03:29,400 Louise Southall: on how inflation is impacting households, but it's really important 65 00:03:29,400 --> 00:03:32,250 Louise Southall: that people also remember how it impacts small businesses and 66 00:03:32,250 --> 00:03:33,870 Louise Southall: it can be really tricky for them. 67 00:03:34,830 --> 00:03:37,230 Sean Aylmer: Joe, from your perspective, how do these sorts of pressures 68 00:03:37,230 --> 00:03:41,010 Sean Aylmer: that Louise is talking about play out in small businesses? 69 00:03:41,100 --> 00:03:43,470 Sean Aylmer: Is it still mostly about cashflow? 70 00:03:44,400 --> 00:03:47,669 Joseph Lyons: Yeah, cashflow is certainly a really important factor, and as 71 00:03:47,670 --> 00:03:51,330 Joseph Lyons: Louise said, obviously the increasing cost of living pressures that 72 00:03:51,330 --> 00:03:54,420 Joseph Lyons: we're all experiencing also is having an impact, particularly as 73 00:03:54,420 --> 00:03:57,660 Joseph Lyons: it relates to wage and price pressures for small business. 74 00:03:57,660 --> 00:04:01,350 Joseph Lyons: But on cashflow through our Access BI report, obviously we 75 00:04:01,350 --> 00:04:03,809 Joseph Lyons: do track payment times, and what we do know is 76 00:04:03,809 --> 00:04:06,330 Joseph Lyons: that small businesses are being paid up to a week 77 00:04:06,330 --> 00:04:09,209 Joseph Lyons: late and that obviously has a really significant impact on 78 00:04:09,210 --> 00:04:13,230 Joseph Lyons: cashflow. There was also a recent report that we released 79 00:04:13,230 --> 00:04:16,890 Joseph Lyons: called the Money Matters Report, which specifically focused on cashflow. 80 00:04:16,890 --> 00:04:19,380 Joseph Lyons: And there are a couple of pretty important stats that 81 00:04:19,380 --> 00:04:21,868 Joseph Lyons: came out of that that I thought I would perhaps share with 82 00:04:21,869 --> 00:04:26,219 Joseph Lyons: you. So 60% of small businesses have reported that they have had 83 00:04:26,219 --> 00:04:29,519 Joseph Lyons: cashflow issues over the past 12 months. And two really 84 00:04:29,520 --> 00:04:32,730 Joseph Lyons: telling ones are that 48% of small businesses are really concerned 85 00:04:32,730 --> 00:04:36,810 Joseph Lyons: about their financial future. And even worse, that 34% of 86 00:04:36,810 --> 00:04:39,960 Joseph Lyons: respondents have said that they can't afford to pay themselves. 87 00:04:39,960 --> 00:04:43,109 Joseph Lyons: So that cashflow impact has a knock on effect all 88 00:04:43,110 --> 00:04:44,789 Joseph Lyons: the way to the small business owner. 89 00:04:45,539 --> 00:04:48,719 Sean Aylmer: Joe, how do small businesses manage that? I mean, I've 90 00:04:48,720 --> 00:04:51,029 Sean Aylmer: always worked in corporates where I got paid every fortnight 91 00:04:51,029 --> 00:04:52,920 Sean Aylmer: or every month. I didn't even think about it to 92 00:04:52,920 --> 00:04:55,979 Sean Aylmer: be perfectly honest. But 34% of respondents saying they can't 93 00:04:55,980 --> 00:04:58,710 Sean Aylmer: afford to pay themselves. I mean, that's clearly not sustainable. 94 00:04:59,339 --> 00:05:04,258 Joseph Lyons: No. So I think resilience through this next phase is 95 00:05:04,260 --> 00:05:07,738 Joseph Lyons: really important. And as Louise mentioned, I think the way 96 00:05:07,740 --> 00:05:10,320 Joseph Lyons: really out of the current climate is really going to 97 00:05:10,320 --> 00:05:13,710 Joseph Lyons: be a focus on productivity. And for small businesses, obviously 98 00:05:13,710 --> 00:05:17,160 Joseph Lyons: that means looking at all of their processes and how 99 00:05:17,160 --> 00:05:20,219 Joseph Lyons: technology can really play a role in that to streamline 100 00:05:20,219 --> 00:05:22,829 Joseph Lyons: their business, but also to give themselves more capacity and 101 00:05:22,830 --> 00:05:25,920 Joseph Lyons: time back so that they can focus on their customers as well. 102 00:05:25,920 --> 00:05:28,859 Joseph Lyons: So there's a couple of examples that we've got within 103 00:05:28,860 --> 00:05:32,730 Joseph Lyons: our own product and our platform and certainly the ability 104 00:05:32,730 --> 00:05:35,219 Joseph Lyons: to be able to attach different payment options to their 105 00:05:35,250 --> 00:05:38,070 Joseph Lyons: invoice so that they can actually get paid faster. We 106 00:05:38,070 --> 00:05:41,699 Joseph Lyons: do know that when there's a payment solution attached to invoice, 107 00:05:41,730 --> 00:05:44,940 Joseph Lyons: our small business customers do get paid twice as fast, 108 00:05:45,210 --> 00:05:47,970 Joseph Lyons: which really bridges the gap on the late payment time 109 00:05:48,120 --> 00:05:49,140 Joseph Lyons: that I mentioned a bit earlier. 110 00:05:50,130 --> 00:05:52,020 Sean Aylmer: Louise, I'll come to you in a moment about productivity, 111 00:05:52,020 --> 00:05:56,939 Sean Aylmer: but just in a very pragmatic sense, Joe, is productivity 112 00:05:56,940 --> 00:05:58,259 Sean Aylmer: mostly about technology? 113 00:05:59,010 --> 00:06:02,370 Joseph Lyons: I mean, technology is a part of the process and certainly 114 00:06:02,370 --> 00:06:04,860 Joseph Lyons: obviously the tools that we have with Xero help enable 115 00:06:04,860 --> 00:06:08,760 Joseph Lyons: that. But equally I think how small business owners lead 116 00:06:08,760 --> 00:06:12,390 Joseph Lyons: their team and their workforce as well and ensuring that 117 00:06:12,690 --> 00:06:14,759 Joseph Lyons: their team are aligned and focus on what their goals 118 00:06:14,759 --> 00:06:15,510 Joseph Lyons: of the business are. 119 00:06:16,199 --> 00:06:17,729 Sean Aylmer: Stay with me. We'll be back in a minute. 120 00:06:24,149 --> 00:06:27,900 Sean Aylmer: I'm talking to Xero's Managing Director Asia Pacific, Joseph Lyons and 121 00:06:27,900 --> 00:06:33,270 Sean Aylmer: Xero Economist, Louise Southall. Louise, productivity, we hear lots about 122 00:06:33,270 --> 00:06:36,089 Sean Aylmer: it in a macro sense, what about in a small 123 00:06:36,089 --> 00:06:38,100 Sean Aylmer: business sense? How does it fit into the economy? 124 00:06:39,029 --> 00:06:41,160 Louise Southall: Yeah, you're right. It's almost like we need to think 125 00:06:41,160 --> 00:06:45,000 Louise Southall: about productivity on two levels. So yeah, at a macro sense, 126 00:06:45,120 --> 00:06:47,849 Louise Southall: and we're going to be talking about productivity a lot 127 00:06:47,910 --> 00:06:51,510 Louise Southall: as we move away from the high inflation environment and start to 128 00:06:51,719 --> 00:06:54,599 Louise Southall: focus on something else. And I think at the macro level, 129 00:06:54,600 --> 00:06:58,200 Louise Southall: it is making sure that as much friction is taken 130 00:06:58,200 --> 00:07:02,190 Louise Southall: out of the economic system as possible. And things like education, 131 00:07:02,190 --> 00:07:06,780 Louise Southall: skill development, making sure transport systems, logistics systems are working, 132 00:07:06,809 --> 00:07:10,140 Louise Southall: all those things are really important at the macro level. 133 00:07:10,410 --> 00:07:13,470 Louise Southall: But then it's also really important for small businesses and 134 00:07:14,130 --> 00:07:16,890 Louise Southall: for small businesses there are things that they can do, 135 00:07:16,890 --> 00:07:20,250 Louise Southall: and certainly technology is a massive part of that solution 136 00:07:20,250 --> 00:07:23,190 Louise Southall: for small businesses. It's where there's a lot of opportunity. 137 00:07:23,610 --> 00:07:25,199 Louise Southall: And I think one of the things that happens with 138 00:07:25,200 --> 00:07:30,450 Louise Southall: small businesses is they might adopt a technology solution and think, " Oh, well, 139 00:07:30,690 --> 00:07:33,660 Louise Southall: I've got that now. That's it. I'm a tech enabled 140 00:07:33,660 --> 00:07:39,120 Louise Southall: small business." But really technology adoption is a continuing journey. 141 00:07:39,120 --> 00:07:42,059 Louise Southall: So it's about making sure that as a small business, 142 00:07:42,059 --> 00:07:46,109 Louise Southall: you're staying up to date around what's available. So for example, 143 00:07:46,109 --> 00:07:51,330 Louise Southall: at Xero, we have loads, over 1,000 productivity enhancing apps 144 00:07:51,330 --> 00:07:53,820 Louise Southall: that can be attached to the account. So it's not 145 00:07:53,820 --> 00:07:57,328 Louise Southall: just about adopting one thing and set and forget. You 146 00:07:57,330 --> 00:08:00,000 Louise Southall: really need to be making sure that you are staying 147 00:08:00,000 --> 00:08:03,179 Louise Southall: ahead of what's happening, staying up to date, and making 148 00:08:03,179 --> 00:08:06,780 Louise Southall: sure that you are using every kind of tool that's available 149 00:08:07,050 --> 00:08:09,300 Louise Southall: in order to run your business. So it's not just 150 00:08:09,300 --> 00:08:15,210 Louise Southall: about accounting software, it's also about customer engagement, doing your invoicing, 151 00:08:15,210 --> 00:08:18,599 Louise Southall: as Joe said, getting paid quicker, doing your quoting. All 152 00:08:18,599 --> 00:08:22,109 Louise Southall: those sorts of things are available and small businesses really 153 00:08:22,109 --> 00:08:24,780 Louise Southall: need to do as much as they can because then 154 00:08:24,780 --> 00:08:27,870 Louise Southall: that frees up their time to do other high value 155 00:08:27,870 --> 00:08:31,560 Louise Southall: things in their business and think a bit more strategically about the business. 156 00:08:32,070 --> 00:08:34,500 Joseph Lyons: And Sean, I'll just build on what Louise has said. 157 00:08:34,500 --> 00:08:38,578 Joseph Lyons: Obviously we are here at Xerocon this week and the 158 00:08:38,580 --> 00:08:42,780 Joseph Lyons: importance placed in the relationship between small business owners and 159 00:08:42,780 --> 00:08:45,300 Joseph Lyons: their accountants and bookkeepers and the majority of small businesses 160 00:08:45,600 --> 00:08:49,770 Joseph Lyons: in Australia do work alongside accountants or bookkeepers. And what they 161 00:08:49,770 --> 00:08:53,069 Joseph Lyons: do is obviously give them the right guidance and support 162 00:08:53,070 --> 00:08:56,490 Joseph Lyons: from a financial planning and strategy standpoint as well, but 163 00:08:56,490 --> 00:08:58,830 Joseph Lyons: also making sure that they are using the right tools 164 00:08:58,830 --> 00:09:00,478 Joseph Lyons: to support them through this next phase. 165 00:09:01,320 --> 00:09:03,300 Sean Aylmer: Joe, just going forward on that, if I'm running a 166 00:09:03,300 --> 00:09:06,540 Sean Aylmer: small business though, I'm very busy, I'm relying, as you 167 00:09:06,540 --> 00:09:08,790 Sean Aylmer: said, on my accountants and bookkeepers and things like that, 168 00:09:09,450 --> 00:09:13,859 Sean Aylmer: how do I as a business owner know what's available? 169 00:09:13,860 --> 00:09:17,609 Sean Aylmer: How do I forward plan? How do I make sure 170 00:09:17,609 --> 00:09:22,650 Sean Aylmer: that I'm ready for anything that's proactive in being ready 171 00:09:22,650 --> 00:09:24,331 Sean Aylmer: for what's coming at me rather than reactive? 172 00:09:24,331 --> 00:09:28,410 Louise Southall: I mean, I think that is the role that the accountant 173 00:09:28,410 --> 00:09:31,559 Louise Southall: and bookkeeper fundamentally plays in working with a small business 174 00:09:31,559 --> 00:09:36,089 Louise Southall: owner. I mean, they are across tax policy and legislation, 175 00:09:36,090 --> 00:09:39,840 Louise Southall: but equally they are well and truly across the tools 176 00:09:39,840 --> 00:09:42,358 Louise Southall: and technology that are coming out that can benefit a 177 00:09:42,360 --> 00:09:45,570 Louise Southall: small business, not just through the Xero platform, but also 178 00:09:45,570 --> 00:09:49,170 Louise Southall: through, to Louise's point, the ecosystem of applications that we 179 00:09:49,170 --> 00:09:52,108 Louise Southall: have that do plug into Xero as well. So the 180 00:09:52,109 --> 00:09:54,870 Louise Southall: role of the relationship with a small business owner and accountant 181 00:09:54,870 --> 00:09:57,330 Louise Southall: and bookkeeper is incredibly important. 182 00:09:58,110 --> 00:09:59,819 Sean Aylmer: Joe, just before we go, tell me about the Xero 183 00:09:59,880 --> 00:10:03,630 Sean Aylmer: Beautiful Business Fund, which you launched this week at Xerocon? 184 00:10:04,020 --> 00:10:06,870 Joseph Lyons: Yeah. We're really excited about this initiative and it really 185 00:10:06,870 --> 00:10:09,420 Joseph Lyons: aligns closely to our purpose, which is to make life 186 00:10:09,420 --> 00:10:12,900 Joseph Lyons: better for small businesses and advisors and communities around the world. 187 00:10:13,320 --> 00:10:18,600 Joseph Lyons: So what we've announced is that we have a $750,000 fund where we're 188 00:10:18,600 --> 00:10:22,139 Joseph Lyons: supporting small businesses around the world, across seven different regions 189 00:10:22,139 --> 00:10:25,080 Joseph Lyons: that we operate in. So there are going to be 28 190 00:10:25,080 --> 00:10:29,249 Joseph Lyons: different awards across the four different categories. So the categories 191 00:10:29,250 --> 00:10:32,700 Joseph Lyons: that we do have, first one being innovating for sustainability, 192 00:10:33,030 --> 00:10:36,600 Joseph Lyons: the second one being trailblazing with technology, the third being 193 00:10:36,840 --> 00:10:40,349 Joseph Lyons: strengthening community connection, and the final one being upskilling for 194 00:10:40,349 --> 00:10:43,980 Joseph Lyons: the future. So each of the winners will receive a $ 195 00:10:44,070 --> 00:10:49,530 Joseph Lyons: 20,000 fund and award for winning their category as well. 196 00:10:49,530 --> 00:10:52,140 Joseph Lyons: And then on top of that, we are going to have four 197 00:10:52,140 --> 00:10:54,449 Joseph Lyons: global winners that will have the opportunity to go into 198 00:10:54,450 --> 00:10:57,870 Joseph Lyons: the pool to win an additional $ 50,000. So we're super 199 00:10:57,870 --> 00:11:01,139 Joseph Lyons: excited to be able to support our small business customers 200 00:11:01,139 --> 00:11:03,839 Joseph Lyons: with this Beautiful Business Fund and we think it's going 201 00:11:03,839 --> 00:11:05,609 Joseph Lyons: to give us an opportunity to showcase some of the 202 00:11:05,609 --> 00:11:07,650 Joseph Lyons: incredible work that happens across our community. 203 00:11:08,340 --> 00:11:10,380 Sean Aylmer: So Joe, just give us those four categories again, because 204 00:11:10,380 --> 00:11:12,210 Sean Aylmer: obviously that reflects what matters to Xero. 205 00:11:12,809 --> 00:11:17,610 Louise Southall: Yeah, the four categories, innovating for sustainability, trailblazing with technology, 206 00:11:18,179 --> 00:11:21,839 Louise Southall: strengthening community connection, and the final one being upskilling for 207 00:11:21,839 --> 00:11:22,379 Louise Southall: the future. 208 00:11:22,949 --> 00:11:25,140 Sean Aylmer: Fantastic. Joe, thank you for talking to Fear and Greed. 209 00:11:25,440 --> 00:11:27,510 Joseph Lyons: Thank you. Thanks for your time this morning. It's been 210 00:11:27,510 --> 00:11:28,890 Joseph Lyons: great having a conversation with you. 211 00:11:29,490 --> 00:11:31,200 Sean Aylmer: And Louise. Thank you for talking to us here at 212 00:11:31,200 --> 00:11:31,800 Sean Aylmer: Fear and Greed. 213 00:11:32,160 --> 00:11:33,300 Louise Southall: Thank you. Thanks so much. 214 00:11:33,780 --> 00:11:37,050 Sean Aylmer: That was Joseph Lyons, Xero's Managing Director, Asia Pacific and 215 00:11:37,110 --> 00:11:40,829 Sean Aylmer: Louise Southall, Economist at Xero, which is a great supporter 216 00:11:40,830 --> 00:11:43,679 Sean Aylmer: of this podcast. This is the Fear and Greed Daily Interview. 217 00:11:43,679 --> 00:11:45,900 Sean Aylmer: Join us every morning for the full episode of Fear 218 00:11:45,900 --> 00:11:49,290 Sean Aylmer: and Greed, Australia's most popular business podcast. I'm Sean Aylmer. 219 00:11:49,620 --> 00:11:50,340 Sean Aylmer: Have a great day.