I think back to 2019 with fondness. It was a simpler time for small businesses. It was a simpler time for all of us.
But we're kidding ourselves if we think it was ideal. The goal for businesses and the economy shouldn't be to just get back to a pre-Covid state.
We have to rebuild better. We must be bigger, bolder, and more efficient than before.
In 2019, more than a quarter of sole traders hadn't paid themselves at some stage to keep their businesses ticking along and the economy was wasting more than $4 billion each year because of inefficient invoice processing.
Last year, 30 per cent of small and medium-sized businesses told Xero they lacked the capital to invest in things that they knew would make their business more efficient.
We have to do better, and this can't just be about small businesses making changes within their operations. This is about rewiring the small business economy to solve long-standing issues that go to the heart of New Zealand's persistent productivity problem.
This requires new government policy and changes to our financial systems. It requires a fundamental shift in our cultural norms around doing businesses with SMEs.
As things stand now, small business revenue is tracking better than most thought it would. But imagine how much stronger our economy would be if small businesses weren't trying to overcome basic barriers.
Small businesses across the country have pivoted in response to Covid-19.
They have found workarounds. They've found new ways to make money. They've elicited loyalty and they've done the hard graft.
Cash flow is the lifeblood of every business. If you aren't getting paid on time or have access to quick lending when you need it, things are tough.
No amount of pivoting can overcome this. Individual ingenuity within businesses is only going to take us so far.
We can and should fund courses to train small business leaders to run their operations more efficiently. But we're facing years of one-on-one training to solve the barriers I'm talking about.
For example, there is now a plan to overcome inefficient invoice processing by introducing a standardised electronic invoicing process.
With e-invoicing, businesses will no longer generate paper-based or PDF invoices that have to be printed, posted or emailed, and buyers will no longer need to manually enter these into their accounting system. Automating the invoicing process improves accuracy and security. It speeds up processing, and reduces errors and delays.
Once fully implemented, e-invoicing is set to bolster the NZ economy with $4.4b in annual savings in processing costs. That's 2 per cent of NZ's 2019 GDP. So making these new digital standards is key in unlocking growth opportunities for SMEs.
But how else can we rapidly transform our economy?
The next frontier for small businesses is opening banking and open data initiatives.
There is no question there are significant benefits available to small businesses (and consumers) through ownership and control of their banking data, which then flows through into economic benefits.
One of the main benefits of open banking is that small businesses have the ability to efficiently access new loans, overdrafts, and other sources of capital.
It means businesses can authorise third parties' access to their financial data, because they own their own data. Unlocked data enables faster loan applications, more personalised loans, and allows new players to enter the market with innovative new products, offers and insights that directly benefit consumers.
Open banking allows businesses to be pre-approved for loans, reduces application times, and reduces fraud risk.
New Zealand lags behind Europe, the UK, Australia and will shortly slip behind Canada in terms of driving an increasingly digital economy and empowering people to own, control and benefit from their own data.
There is a lot to be worked through and data security is important. But the most important thing is that we keep making progress, keep the consumer at the centre of all data systems and build open data frameworks that encourage and reward innovation.
The Government's business finance guarantee and small business cash flow loan schemes end on December 31. So we can't afford to wait for open banking reforms.
We must create a new digitised economy built around control of our own data and standard digitised processes that enable accuracy, efficiency and innovation.
Sure, those aren't the most exciting words ever written, and it's far more interesting to talk about how individual businesses have pivoted in the face of Covid. But now's the time to solve the big structural problems holding small businesses back.
Despite everything small businesses have faced this year, revenue has been tracking much better than most of us assumed. So you have to wonder what would have been possible this year if we had already removed historic barriers to lending and getting paid for small businesses.