As most of the country settles into a new-look Alert Level 2 while Auckland continues to endure an Alert Level 4 lockdown, new data from MYOB paints a picture of the astonishing impact of the latest COVID-19 outbreak on New Zealand's SMEs.
Blows to SME cashflow
Based on activity from a representative sample of aggregated and highly anonymised MYOB online customers, insights from across seven days ending 7 September showed that cash deposits from EFTPOS card payments, a strong signal of the immediate direct effects of lockdowns, have taken a significant hit, reaching a level that is -63% below a pre-COVID baseline.
While this coincides with a week at Alert Level 3 for much of the country, this is only a marginal improvement on the second week New Zealand had at Alert Level 4 (seven-day period ending 28 August), when overall cash deposits from EFTPOS card payments were -72.6% below the baseline.
Impacts to industry
Given the restrictions on businesses during Level 4, the hit to cash flow for certain sectors has been substantial. For example, in the seven days ending 28 August:
- Total deposits from EFTPOS card payment activity in Accommodation and Food Services were
-85% below a pre-COVID baseline - Total deposits from EFTPOS card payment activity in Retail and Trade were -59% below a pre-COVID baseline
In comparison, seeing only very minor rises since parts of New Zealand moved into Level 3, insights from the seven days ending 7 September showed:
- Total deposits from EFTPOS card payment activity in Accommodation and Food Services were
-78% below the pre-COVID baseline - Total deposits from EFTPOS card payment activity in Retail and Trade were -50% below the pre-COVID baseline
"It's no secret that lockdowns put increased amounts of pressure on SMEs and in our COVID-19 SME Snapshot. We saw that 46% of SMEs said a short-term Alert Level 3 or Alert Level 4 lockdown would put their business under significant pressure. We're seeing in our data now how much impact these measures have on local businesses' financial health," said MYOB Head of Customer Service, Jo Tozer.
"Just before lockdown, 31% of SMEs we polled in our Economic Snapshot said they had more work in the pipeline over the next three months than they would usually expect. As customers cancel or postpone projects, due to either the current restrictions or uncertainty around the months ahead, their likely focus will be on how to make up any shortfall as soon as we're out of this."
Invoicing activity
Interestingly, in the seven days to 28 August, invoice creation activity overall was up to 3.5% above baseline, with notable increases in invoicing visible amongst the Accommodation and Food Services sector (+10.6% above baseline) and Arts and Recreation Services (+7.3% above baseline) sector – two industries particularly limited by the lockdown restrictions.
Jo Tozer explains: "The invoicing activity we saw earlier on in lockdown demonstrates that SMEs were looking to get any and all cash into their businesses – this could include part billing, wrapping up and even forward invoicing for booked projects as a way to do that.
"For those sectors we know are doing it tough, like Accommodation and Food Services or Arts and Recreation, it's clear from our data that these businesses have been looking extremely hard at any opportunity to bring money into the business. With such constrained cash flow under Level 4, what we see now, of course, is that opportunities to bring that cash in via their billings have slowed."
For the seven days to Tuesday 7 September, overall invoice creation was -58.6% below a pre-COVID baseline, and following a surge in invoicing activity the week prior:
- Invoice creation for Accommodation and Food Services ended the week at -57.1% below baseline
- Invoice creation for Arts and Recreation Services ended the week at -54.6% below baseline
Jo concludes: "While four or five weeks might seem like a wrinkle in time to some, the impact to businesses of our COVID-19 lockdowns are anything but short-term.
"In our COVID-19 SME Snapshot, we saw that nearly a third of SMEs would need to seek financial support to cover their overheads if there was another Level 4 or Level 3 lockdown, and in reality, overheads are just one of many financial burdens they'll now be facing as a result of the latest outbreak.
"Right now, SMEs need all the support they can get and not just from consumers. In looking at these figures, it is time to reassess whether all current financial assistance goes the distance – because if it doesn't, neither will some of our small businesses."
MYOB Head of Customer Service, Jo Tozer
*The data used for calculation represents activity by an aggregated and highly anonymised sample of MYOB’s SME online business users.
