Ben Thompson: How small businesses can get financially fit in a post-Covid economy


Last year was one of the toughest in recent history for the small to medium-sized business (SMB) community. While New Zealand’s hard and fast lockdown may have limited the spread of Covid-19, small firms struggled under the immense pressure of hibernation, leading to long-term damage and in some cases, business closures.

According to Xero’s Small Business Insights, Kiwi SMBs experienced a 38 per cent decline in year-on-year revenue growth at the peak of lockdown in April, forcing over 100,000 businesses to access government support in the Small Business Cashflow (Loan) Scheme (SBLS).

However, New Zealanders are resilient and support for small businesses is widely recognised.

A recent Forrester Consulting study found 69 per cent of local consumers feel proud of the small businesses in their community, and would feel a “personal loss” if they were to close. This sentiment is reflected in the early signs of an economic recovery with SMBs seeing six months of positive revenue growth and the upward trajectory is expected to extend into this year.

This year presents a fresh start for small firms. With ANZ showing business confidence on the rise, now is the perfect time for SMBs to get their financial house in order, giving themselves a fighting chance at a strong and sustainable recovery in a post-Covid economy.

Here’s how New Zealand small businesses can get financially fit this new year:

Know where you stand

To gain an understanding of the financial health of your business, you first need to work out your current cash flow position. This means going over your financial data in minute detail, including profit and loss statements, cash reserves, outstanding invoices and liabilities, as well as any other financial commitments you may be tied to.

If you use smart accounting software like Xero, Sage or MYOB, detailed statements and reports should be readily available to help you classify expenses.

Find your bare minimum

Once you have a comprehensive understanding of your cash position, it can help to classify expenditure as “nice to have” and “essential” to work out where you can cut back costs if need be.

Work on dwindling down the essential expenses to the costs that keep the lights on – in other words, the bare minimum spend that will keep your business afloat.

Plan for the worst, and best-case scenario

Financial planning or forecasting is challenging at the best of times, never more so than in a global economic crisis. With Covid-19 creating so much uncertainty, aim to work out a financial plan for the next six months to a year. Within these plans, consider the best and worst-case scenarios from a rapid vaccine rollout to another strict lockdown.

If you’re unfamiliar with financial modelling, it might be worth consulting an expert. Alternatively, there are plenty of free online resources, such as Eloquens, that will provide you with a basic planning template.

It’s never easy to imagine the worst, however with a plan in place, you’ll be more prepared to face challenges with a calm and collected mindset, giving your business a higher chance of survival and recovery.

Learn from late payers

The average late payment time for a New Zealand small business is about 25 days.

Unfortunately for SMBs, late payments are more than inconvenient, they’re costly too. Small businesses that are consistently paid late grow their revenue at three times a slower rate than their paid on-time counterparts, stunting long-term goals and financial plans.

In this environment, small businesses simply cannot afford to let late payments continue. That’s why it’s important to look at new solutions, like an automated payments collection system, to streamline the process and minimise cash flow risk. The other option is to implement stricter payment terms, such as requesting partial or full payment upfront from repeat late payers.

Do your research

Given the severity of the pandemic impact on the small business community, the New Zealand government has introduced various SMB-tailored support packages to help firms survive the crisis. has a helpful guide for grants, advice and mentoring options on offer, so be sure to do some research into what support your business could be eligible for.

Put your personal financial wellness first

Lastly, it’s important to remember that there is no shame in insolvency or business closure. At all costs, avoid taking out loans against big assets like your home, or using your savings to keep your business afloat.

Yes, these are unprecedented times for the SMB community, however the priority must be your own health and wellbeing – financial, physical and mental – before your business.

– Ben Thompson is chief executive and co-founder of people management platform, Employment Hero.

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