Small businesses going 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 ResearchDesignated by Small Business Platform ZeroA 20% increase in the number of companies adopting cloud-based digital tools could add $7.8 billion to the economy each year.

Zero Country Manager Bridget Snelling is encouraging every small business in Aotearoa to adopt just one app to help them take the pain out of their day-to-day operations.

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

„It’s one small step that will make a big difference, adding nearly $8 billion to our gross domestic product through improved productivity. Small business owners across the country should start by talking to their accountants or bookkeepers about what digital tools could benefit their business.” Snelling says.

Working smarter, not harder

Snelling says there are all kinds of digital tools to help small businesses, no matter what industry they operate in.

„For example, if I’m a retailer and I stocktake manually, it might take me four hours at the end of every week or fortnight,” he says.

„[But] If I use a digital inventory management system, that means I only have to spend half an hour looking at my inventory and doing a digital stocktake.

„Fundamentally, what we’re aiming for to become a digitally advanced economy is to ensure that every hour we work, we’re doing something that only a human can do.”

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Previous NZIER research has found Aotearoa lags behind the OECD in terms of productivity output.

It revealed that New Zealanders would need to work an extra eight hours a week to earn the average OECD output. And if they want to top Ireland, they will need to work an extra 10 hours each working day to produce the same amount of GDP per worker.

„The key message here is that we need to work smarter,” Snelling says. “Do grunt work, not just bow your head. It’s really about how we do this best.

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

Snelling says concerns about cost and return on investment are often cited as reasons why businesses don’t adopt new technology.

Despite the costs of digitalisation, new NZIER research found the payback period for businesses is relatively short, with companies typically seeing a positive return on investment within two to three years.

But some mindsets also stand in the way of digitization, says Snelling.

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

„If people act the same way for years, motivation to change can be difficult.”

When a business wants to digitize its operations, there is confusion as to where to start.

„There are so many options out there,” Snelling says. „It’s like that decision paralysis problem: 'How do I make a decision? How do I know what’s the right choice for me?’

“We encourage all small businesses who don’t know where to start to speak to or visit their accountant Zero App Store.”

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Pressure for government investment

Snelling says there needs to be more help for businesses looking to go digital, and is disappointed that last month’s Government budget did not include any investment in that area.

„For small businesses to really take action on digitization, it’s going to take a little bit of information — it’s going to take a little bit of hand-holding.”

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

Its short-term recommendations include the development of the New Zealand Productivity Solutions Grant, which Snelling says will help break down the cost barrier for small businesses.

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

Snelling says Singapore’s SMEs Go Digital program makes it much easier for small businesses to adopt technology.

In the long term, the NZIER report says the government should support the digitization of businesses by actively investing in digital literacy across society and encouraging and subsidizing the continued learning of digital skills in the workforce and education.

„Investing in small business is really a big investment in our entire economy,” Snelling says.

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

This content is sponsored Zero, a global small business platform offering cloud-based accounting software and other digital tools. You can find the full NZIER report on digitization Here.

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