Xero data shows US small business sales rise unevenly

Xero has published new state-level data on U.S. small business sales and payment trends, showing regional differences as national sales rose for a second straight quarter.

Drawn from more than 32,000 U.S. small businesses, the data covered 18 state and regional groupings and pointed to a mixed picture beneath the national trend. Sales grew 4.0% year over year in the June quarter, up from 3.5% in the March quarter and 2.1% in the December quarter, but still below the long-term average of 5.4%.

Monthly figures suggested consumer demand remained fragile. Sales growth slowed from 5.2% in March to 2.6% in May before recovering to 4.8% in June. Xero linked the pattern to higher fuel prices and broader household cost pressures that weighed on discretionary spending before easing later in the quarter.

Payment data showed a separate strain on small businesses. Late payments improved by 0.5 days to 8.5 days, but average payment time rose from 28.6 days in the March quarter to 29.3 days in the June quarter, indicating businesses were waiting longer overall to receive cash.

Xero said this may reflect some businesses extending invoice terms, delaying when money reached suppliers and service providers. For smaller firms, payment timing can shape day-to-day liquidity even when top-line sales are improving.

Louise Southall, Economist, Xero, said the gap between broader economic indicators and conditions for small firms had become more pronounced.

"The headline economy and the small business economy are increasingly telling different stories," said Louise Southall, Economist, Xero. "While AI investment is helping drive broader economic growth, many small businesses continue to face higher costs, cautious consumer spending and tighter cash flow. That's why operational data like sales and payment trends provides a clearer view of conditions on Main Street."

Regional picture

The state-level breakdown showed sharp differences across the country. Maryland, Virginia and Washington, D.C., posted the strongest sales growth at 7.8% year over year, followed by New York at 7.6% and Delaware at 7.1%.

At the other end of the scale, Utah recorded the weakest result, with sales falling 4.5% year over year. Washington posted growth of 0.3%, while Ohio grew 0.7%, making them the slowest-growing states still in positive territory.

Payment performance also varied widely. California businesses were paid in 25 days on average, nearly 12 days faster than businesses in Texas, where payment times reached 36.9 days.

The gaps suggest local operating conditions and business practices continue to shape how quickly small firms convert invoices into cash. They also point to a recovery that remains uneven even as the national sales measure has improved.

Matan Bar, Chief Executive Officer, Xero U.S., said the cash position of smaller firms remained a better guide than national headlines.

"For small business owners, the truest economic indicator isn't a headline about the economy, it's the state of their cash flow," said Matan Bar, Chief Executive Officer, Xero U.S. "This quarter's insights tells us that sales are improving, but many businesses are still contending with longer payment terms, rising costs and uneven conditions nationwide. That's why Xero continues to innovate, giving customers more ways to achieve real-time visibility into their cash flow, and why we encourage them to lean on their advisors to make smarter, more confident decisions as conditions shift."

Pressure points

The figures add to evidence that smaller companies are not sharing evenly in the drivers of broader U.S. economic growth. Xero said AI-related investment had supported the broader economy. Still, much of that spending was concentrated among larger businesses, while small firms remained more exposed to softer household demand, margin pressure and rising input costs.

That split is visible in the June quarter data. Sales moved higher nationally, but the pace remained modest by historical standards, and longer waits for payment pointed to pressure on working capital. For many small businesses, stronger revenue does not automatically translate into a healthier cash position.

Fuel costs were one factor highlighted in the report, with elevated petrol prices appearing to affect discretionary consumer spending during the quarter, together with broader pressure on household budgets that created another obstacle for businesses reliant on consumer demand.

The state-level release expands Xero Small Business Insights, which previously tracked national trends. By adding regional detail, Xero offers a closer look at how local economies are diverging even when aggregate figures suggest a steadier recovery.