Missed opportunity: $3 billion lost in NZ each year due to lack of productivity, research finds

Sole traders in this country are pessimistic about the year ahead as new research reveals more than $3 billion is estimated to be lost to unproductivity each year.

The latest Sole Trader Pulse survey conducted by Wellington-based accountancy firm Hnry estimates that $3.2 billion is lost in business earnings annually due to traders using outdated methods of managing tax and administrative work.

To come up with that figure, Hnry took the average yearly sole trader income of $58,000 and multiplied it by the estimated number of self-employed individuals in New Zealand (490,000) to get the total self-employed income earned across New Zealand every year - the equivalent of about $28.4b.

From there, they calculated the percentage of the average sole trader's work week spent doing financial administration, which it found to be an average of five hours, representing about 11 per cent of each week of the year.

Hnry chief executive James Fuller said the $3.2b figure was a conservative estimate given that the average yearly sole trader income used in its calculations was much lower than the national average income - meaning the overall sum lost in productivity was likely higher.

Hnry's research covers the likes of tradespeople, freelancers, midwives and contractors; sole-traders who are running a small enterprise without staff.

"If you look at how long they are having to spend to wrestle with financial admin, that average across the country is five hours a week, which is huge. Some sectors are harder hit and it will be more than that, with tradies spending an average of 10 hours a week on financial admin ... this is an accumulative cost to the New Zealand economy [and it] is huge at a time where the self-employed sector wants to be focused on growing their business.

"To have that amount of time lost to what seems like labour-intensive and low-value tasks is pretty confronting," Fuller told the Herald.

He said wasted time on jobs other than the main task central to the business was a huge issue for sole traders.

This quarter's pulse survey revealed 55 per cent of sole traders - making up almost 20 per cent of the country's workforce - have seen their business improve in the three months to the end of June. Tradespeople, however, were finding the economic environment most challenging, said Fuller, spending double the time of peers, 10 hours a week, on financial admin.

"Over the last three months sole traders have actually seen their business improve. The people that have seen the least positive quarter though were tradies. Independent tradespeople have been less well off more recently, particularly when you think about supply chain issues and cost of living, especially cost of fuel for tradies who are on the road for a lot of their time."

Despite increased earnings over the last quarter, many independent earners are tightening their belts, said Fuller.

Forty-one per cent of sole traders said that they believed the health of the economy in six months' time was going to be either "poor" or "very poor".

"That is quite a stark statistic, particularly when you look at the rates of people looking [at] going to get lending," said Fuller.

"People are worried - and slightly pessimistic about the outlook of the economy."

Other findings show 75 per cent of sole traders believe that the 2022 Budget would have either "zero" or a "negative effect" on their business. Only 3 per cent of those surveyed believe the latest Budget funding will actually bring any material benefit to their business.

Sole traders of the older generation, aged 55 and above, were found to be the most pessimistic of self-employed Kiwis in the survey findings, with inflation and interest rate increases affecting the majority of sole traders.

Eighty-two per cent of traders reported that they are now having to pay more for supplies and services, and 85 per cent reported that they were avoiding taking on additional debt.