Xero’s recent data release indicates small business sales are beginning to recover in 2024. Despite a decline in the March quarter, sales showed year-over-year improvement, with February marking the first sales increase in 13 months. However, average payment times have improved slightly, while late payments have worsened, now averaging nearly 10 days late.
The Xero Small Business Insights (XSBI) program, which collects data from Xero’s small business subscribers in North America, revealed these trends. The program tracks sales and payment times across four major US regions: West, Midwest, Northeast, and South.
February’s sales growth is a positive sign for small businesses, showing the first rise since January 2023. Although sales fell by 1.8% year-over-year in the March quarter, this is an improvement from a 2.4% decline in the previous quarter. Monthly data showed mixed results, with sales improving in February (+1.3% year-over-year) but falling again in March (-4.7% year-over-year). The March drop is partly attributed to Good Friday occurring in March this year instead of April.
At the regional level, the Northeast saw the largest decline in sales (-3.5% year-over-year) for the March quarter, followed by the Midwest (-3.3% year-over-year), the South (-1.7% year-over-year), and the West (-0.5% year-over-year).
Xero’s economist, Louise Southall, noted the significance of February’s growth, suggesting it signals a turning point for small business sales. She highlighted anticipated interest rate cuts by the Federal Reserve as a potential boost for consumer spending, which could further support small businesses.
Average payment times showed slight improvement, with small businesses waiting an average of 28.5 days to be paid in the March quarter, down from 28.7 days in the previous quarters. However, late payment times have worsened, with businesses being paid an average of 9.8 days late in the March quarter, up from 9.0 days in the previous two quarters. February saw a particularly sharp increase in late payments, averaging 12.6 days late.
Ben Richmond, Managing Director, North America at Xero, emphasized the importance of addressing late payment issues. He highlighted the role of advisors in helping small businesses implement strategies to encourage timely payments. Richmond suggested initiatives such as offering diverse payment options, integrating “pay now” features on invoices, and sending timely customer reminders to reduce late payments.
Image: Xero
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