Home Technology Small businesses that go digital can add billions to the economy

Small businesses that go digital can add billions to the economy

Small businesses that go digital can add billions to the economy

Digitization can bring many benefits to New Zealand businesses, including increased productivity, innovation and better sustainability – and now a new report estimates it could boost the country’s GDP by billions of dollars.

The NZIER study, commissioned by small business platform Xero, found that a 20% increase in the number of businesses using cloud-based digital tools could add $7.8 billion to the economy each year.

Xero Country Manager Bridget Snelling encourages every small business in Aotearoa to use just one app to address a pain point in their day-to-day operations.

It may not sound like much, but with small businesses making up 97% of New Zealand businesses, those small actions can really add up, she says.

“This is a small step that would make a big difference, potentially adding nearly $8 billion to our GDP through improved productivity. Small business owners across the country should start by simply talking to their accountants or bookkeepers about what digital tools can benefit their business,” says Snelling.

Work smarter, not harder

Snelling adds that there are a variety of digital tools available to help small businesses, no matter what industry they’re in.

“For example, if I’m a retailer and I’m doing a manual inventory, it takes me four hours at the end of every week or two,” she says.

“[But] if I use a digital inventory management system, that could mean I only have to spend half an hour looking at my inventory and doing a digital inventory.

“Essentially what we’re striving to become a more digitally advanced economy is to ensure that every hour we work is doing something that only a human being can do.”

Previous NZIER research has shown that Aotearoa lags behind the OECD in terms of productivity.

It revealed that New Zealanders would have to work an extra eight hours a week to catch up with the OECD’s average output. And if they wanted to catch up with Ireland’s top, they would have to work an extra 10 hours each working day to provide the equivalent GDP per worker.

“The main message here is that we need to work smarter,” says Snelling. “It’s not just head down, do the grunt work. It’s really about how we do this smarter.”

So, why aren’t more NZ businesses turning to digitization?

Snelling says cost and concerns about return on investment are often cited as reasons for companies not to adopt new technology.

While digitization comes at a cost, the new NZIER study found that the payback period for businesses is relatively short, with organizations typically seeing a sustained positive return on their investment in less than two to three years.

But Snelling says certain mindsets can also be a barrier to digitization.

For example, some companies may feel that what they are already doing is good enough.

“When people have been doing things the same way for many years, it can be hard to be motivated to change.”

Then there is the confusion about where to start if a company wants to digitize its operations.

“There are so many options,” says Snelling. “It’s like that decision paralysis problem, ‘How do I make a decision? How do I know what is the right choice for me?’

“We encourage any small business that doesn’t know where to start to talk to their accountant or visit Xero’s App Store.”

Insist on public investment

Snelling says that more help should be offered to companies that want to digitize, and that it was disappointing that there was no investment in that area in the national budget last month.

“Getting small businesses to actually take action on digitization will take more than a little bit of information – it will take some hand-holding.”

Snelling says Denmark and Singapore are both good examples of what strong government investment in digitalisation can do for an economy, and the NZIER study looked at similar steps the New Zealand government could take.

The short-term recommendations include developing a New Zealand Productivity Solutions Grant, which Snelling says would help break the cost barrier for small businesses.

The NZIER report also recommended establishing a chief technology officer-as-a-service to help small businesses identify and implement the digitization that is best for them.

Snelling says Singapore’s SME Go Digital program makes technology adoption much easier for small businesses.

In the longer term, the NZIER report says the government should support digitalisation of businesses through things like actively investing in digital literacy across society, and promoting and subsidizing continuous digital skills training in the workforce and education .

“An investment in a small business is actually a huge investment in our entire economy,” says Snelling.

“It’s important that we drive this digitization because we know the economic benefits will be huge.”

This content is sponsored by Xero, a global small business platform that provides cloud-based accounting software and other digital tools. The full NZIER report on digitization can be found here.

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