Xero: Digitally-enabled small businesses are weathering the COVID-19 pandemic better

Xero, the global small business platform, has released a report highlighting the economic impact of the COVID-19 pandemic on small businesses around the world.

Source: Pandemic Insights: Small Business Experience report. Searches in Xero’s app marketplace from February to July 2020. Shopify and Woocommerce enable e-commerce while Stripe and Square facilitate payments.

The Xero Small Business Insights (SBI) Special Report, Pandemic Insights: Small Business Experience, was produced with AlphaBeta (part of Accenture), and based on anonymised and aggregated records of over 300,000 Xero subscribers. It shows the impact on small business revenues and jobs in New Zealand, Australia and the UK. In North America and Asia, these insights are supported by survey-based customer research.

According to the report, digital tools have helped small business adapt to new trading environments, through remote working solutions, and using online stores or delivery apps.

The report also noted that apps enabled small businesses to automate manual business processes, improving their productivity. The typical business with staff needs to conduct 50 to 70 different activities to serve their customers and manage their affairs*, the company said.

Past research by Xero SBI and AlphaBeta has shown that digitally-enabled small businesses in Australia grow faster than non-digitally-enabled businesses. In the 2017-18 financial year, Australian firms on Xero using apps grew revenue by 5.5%. This compares with revenue growth of 3.6% for firms on Xero with no connected apps*.

A Xero SBI and AlphaBeta report in September 2019 also found that technology and business growth tend to be highly correlated. In Australia, small businesses with higher ICT spending tended to have 3.5% faster revenue growth than those with lower information and communications technology (ICT) spending growth**.

The Xero SBI data showed that small businesses using apps saw revenue declines during the crisis that were 12% smaller than other small businesses. Job losses for digitally-enabled small businesses were 12% smaller than for small businesses that were not digitally-enabled. Small businesses that use apps heavily - defined as with five or more apps connected to their account - had revenue falls that were one-third smaller and 40% fewer job losses than other small businesses through the COVID crisis.

For the current study, the share of businesses connecting new apps through the Xero marketplace was almost double in April 2020 than in an average month. Adoption was driven by professional services firms, with over twice as many small businesses in this sector adding new apps as the crisis hit than in an average month. From an analysis of the searches made by small businesses in the Xero app marketplace from February to July 2020, cash flow reporting and management apps, plus apps for e-commerce – such as Shopify and Stripe – were popular.

"Being able to quickly provide insights of this scale, with country comparisons, provides better understanding as to how the small business recovery can be supported around the world," said Steve Vamos, CEO, Xero.

“Small business is family and community. It’s a big source of growth and innovation in economies and they are doing it tough right now.”

Xero is a cloud-based accounting software platform for small businesses with 2.38 million subscribers globally. Xero offers an ecosystem of over 800 third-party apps and 200+ connections to banks and other financial partners.

Details:

Read the Pandemic Insights: Small Business Experience report

*Xero & AlphaBeta. From little things big things grow: How digital connectivity is helping small business thrive. 2018.

**Xero & AlphaBeta. Wired for success: The impact of technology spending on business. September 2019.

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