Why more collaboration is needed to support the small business economy

In a year marked by political uncertainty, a large majority of small businesses are still facing barriers to success.

• Click here to read the full report on the state of Small Businesses.

Issues such as high inflation, late payments, and disparate levels of financial literacy are all contributing to the need for more support, digitalisation and skills development for them to thrive.

Despite this, Xero’s seventh annual State of Small Business report once again shows optimism and ambition amongst small businesses in South Africa as 87% are positive about their outlook for 2024 and nearly three-quarters (73%) reported business growth over the past 12 months. 

We need to think about how to best nurture this positive mindset and connect the dots better amongst those who support small businesses. Because while there are positives, there is still so much potential for better collaboration and growth.

Challenges and barriers to growth remain

This level of optimism however, doesn’t disguise the challenges faced.

Our research shows the top barriers small businesses expect to face in the next year are political and economic instability (55%), unpredictable loadshedding (50%), lack of government support (49%), and access to funding (26%).

Late payments and cash flow remain the primary financial issues with 24% of small business owners experiencing some degree of cash flow issues, and out of those, 72% have used personal funds to keep their business afloat.

Technology is helping businesses operate efficiently

Historically our research has shown a steady increase in cloud technology adoption. More businesses are seeing the benefits, from easier team collaboration, to improving business operations and increasing profits.

In fact, 27% said technology has been the most significant factor in helping their business survive the past 12 months.

There’s room for further digitalisation, with cost (66%), having a skills gap (65%), and not knowing how to get started (41%) being the main barriers to adopting more technology.

With over half of small businesses planning to invest in new technology this year, it’s crucial that we offer support and advice to help them choose the right tools.

Dialing up concerted efforts for more collaboration

South Africa has huge potential to grow the small business economy through digitalisation, and I firmly believe that accountants and bookkeepers will be key drivers of this.

According to our report, 81% of small businesses placed their accountant or bookkeeper as their most trusted business advisor. That indicates that this relationship is key to business success within the advisory space.

As accountants continue to play a pivotal role, we need to connect the dots between all the stakeholders that support small businesses to realise their full potential and create better systems for people to start and grow businesses.

Because only a connected, enabled environment will create the change we need; where entrepreneurship is a leading, considered pathway to economic independence.

You can read the full report: State of South African Small Business 2024 here.

By Colin Timmis, Country Manager, Xero South Africa.