Australian SMEs are continuing to struggle under the weight of late payments, with many business owners forced to chip in from their family accounts to cover the shortfall.
A My Business poll on its website over the month to 19 November asked readers, “How quickly are your invoices typically paid by your customers/clients?”.
Of the 153 respondents, just over half (58.9 per cent) said they are lucky enough to have most of their payments come through within 30 days.
Some 16.3 per cent said they charge at the point of sale, while 9.2 per cent said they are typically paid within seven days, and a further 13.1 per cent within 14 days. In addition, 20.3 per cent said they receive most payments within 30 days.
Yet that leaves well over a third being forced to make do without monies owed for considerably longer.
The highest proportion of respondents (30.1 per cent) said that it typically takes two whole months to be paid for the goods or services.
Furthermore, 7.2 per cent said they are usually forced to wait for up to four months, but 3.9 per cent said that more often than not, they are left waiting even longer.
‘Redirecting funds, sacrificing growth’
Meanwhile, payments platform Grapple has released the results of its own research, which went further in a bid to understand the flow-on impacts that late payments are having on family finances and wider spending habits.
Based on the views of 326 Australian business owners and decision-makers, it found that the financial restrictions and stress on individuals affected by late payments are having a noticeable ripple effect, hitting not just the businesses but their owners, families and communities with “devastating” force.
According to the report, almost half (47 per cent) of those polled cited late incoming payments as causing them “significant” stress.
To cover the shortfall of incoming funds, SMEs are sacrificing business growth opportunities and even redirecting personal finances into the business — just at the time the national economy is flagging, with the Reserve Bank, retailers and the government urging Australians to keep spending for the economy’s sake.
“In the past 12 months alone, those surveyed estimated that nearly one in five of their invoices had been paid late, with one in three businesses experiencing astonishing delays of three years or more at one time or another in the past,” said Grapple CEO Stephen Dawson.
“To address this cash flow issue, more than four out of 10 people surveyed had drawn on personal funds, with some even tapping into pools set aside for further education, school fees and even medical expenses.”
Furthermore, 70 per cent want the government to step in and protect small businesses from being held hostage to bigger companies.
Doing so, Mr Dawson said, could actually improve rather than hinder relations between businesses of vastly different size.
“An interesting takeout for large businesses is that nearly eight out of 10 respondents agreed that fairer payment terms would improve their working relationship with the larger company, and even strengthen the loyalty between the parties,” he said.
“Large businesses that want to reduce supplier turnover, improve relationship efficiency or keep good [with] SMEs for longer might want to consider this insight.”
The results of both polls come a day after the Australian Small Business and Family Enterprise Ombudsman revealed that many struggling SMEs are leaving it too late to seek help for financial difficulties, dramatically raising the risk of them falling into insolvency.
My Business is hosting a live webcast this Thursday specifically for Australian SME owners and operators on the issue of cash flow, where late payments and invoice management will form one of the core discussion points.
ATO assistant commissioner Andrew Watson will also be on hand to answer business questions about e-invoicing and other Tax Office measures and insights, as will Keith Payne of invoice and expenses management platform SAP Concur.
Also on the panel will be Shelley Foster, herself the leader of an SME and one which deals with countless other small and medium businesses turning to digital tools to better track and control their cash flow.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
ATO’s 37% tax on Christmas festivities
By George Morice
Performance anxiety not just a bedroom thing
By Dr Louise Mahler
Accommodating older workers ‘not hard, just different’
By Kim Seeling Smith