A recent report has sounded the alarm, revealing that South Australian small businesses are grappling with the lowest labour productivity among all mainland states.
According to Xero’s Small Business Productivity: Industry and Regional Trends report, these businesses are generating an average of $97.20 in sales per hour worked, a figure significantly below the national average of $100.30. In contrast, the most productive businesses, particularly in Western Australia, are achieving figures as high as $102.50 per hour.
Read the report here
This concerning trend is driven by factors such as labour shortages, rising inflation, and economic uncertainty, which have made it difficult for small businesses to thrive. This is alarming for the state overall, as 98% of South Australia’s businesses are small.
Despite these challenges, South Australian businesses have the potential to transform these hurdles into stepping stones for growth with the right strategies in place.
Why productivity matters
Productivity is a key driver of profitability. When businesses improve efficiency, they can boost profits, pay higher wages, and even reduce prices to remain competitive. Xero economist Louise Southall notes that businesses with stronger productivity are better equipped to navigate economic challenges like inflation, as they can maintain growth without cutting staff or compromising quality.
For small businesses in South Australia, there are several strategies that can help lift productivity and improve overall performance.
5 tips to improve productivity in your small business
1. Invest in technology
Agriculture and construction have noticed productivity movements by embracing technology. Automation tools, cloud-based software, and systems that streamline administrative tasks free up time for employees to focus on more of their core skills and role.
For example, using accounting software to automate invoicing, payroll, and financial reporting can drastically reduce time spent on manual processes. This not only saves time but also minimises the risk of errors, improving overall efficiency.
2. Upskill your workforce
Investing in your employees’ skills is crucial for driving productivity. A well-trained team can perform tasks more efficiently, reducing time wastage and errors. Offering training in new software, customer service, or even time management can have a significant impact.
As accountants, we’ve seen businesses improve their operations simply by upskilling staff in financial literacy. Employees who understand key financial metrics like cash flow and profitability can make more informed decisions, contributing to overall business success.
3. Focus on cash flow management
From an accounting perspective, effective cash flow management is critical to sustaining business growth. Keeping a close watch on incoming and outgoing cash allows businesses to make smarter investment decisions and avoid financial bottlenecks that may hamper productivity.
For small businesses, regularly reviewing cash flow statements and forecasting future financial needs can help maintain a steady flow of resources, enabling them to reinvest in productivity-enhancing tools or staff.
4. Review and streamline processes
One of the most effective ways (and one of our favourites) to boost productivity is by reviewing and refining internal processes. Consider conducting an audit of your current operations to identify inefficiencies or bottlenecks. From there, you can implement process improvements to eliminate wasted time and resources.
For instance, businesses can streamline communication through project management tools or reduce unnecessary meetings by setting clear agendas and action items.
5. Track productivity metrics
It’s surprising how few businesses track their productivity. Without measuring how your business is performing, it’s difficult to know where improvements can be made. Setting up KPIs like sales per hour worked, customer acquisition rates, or project turnaround times help you monitor progress and make data-driven decisions.
From an accountant’s perspective, tracking productivity metrics is just as important as tracking financial performance. Regularly reviewing these numbers can highlight areas where investments in technology, staff, or processes are needed.
South Australia’s small businesses face unique challenges, but by adopting these strategies, they can improve productivity and profitability. While factors like inflation and labour shortages may seem daunting, taking a proactive approach to managing productivity will help your business thrive in the long term.
As South Australia continues to evolve, businesses that embrace technology, upskill their workforce, and streamline their processes will be best positioned to weather economic challenges and enhance their competitiveness.
