The shocking amount of time SMEs spend chasing overdue invoices has been revealed, with one business owner suggesting the problem is crimping the broader economy.
Following a recent story on My Business about late payments contributing to mental health problems among stressed business owners, tradesman Joe Leahy suggested that late payments are having a drag on the overall economy and employment rates by crimping the ability of smaller businesses to grow.
“Three quarters of my invoices are overdue as usual. We are not banks. We are tradespeople. It really inhibits our ability to invest properly in our business,” Joe tells My Business.
“It usually means we have to chase other work to try and find some money to pay the bills, which usually results in having even more outstanding invoices. It’s desperate.”
Joe adds: “Once you have completed scope of works, it should be compulsory to be paid within two weeks.
“The people that finance construction projects should not be allowed to operate if they are unwilling to open up their wallet as bills fall due.”
Joe’s comments come as payments provider IntegraPay released the findings of its State of Pay report, which found many business owners are spending as much as eight hours every week – the equivalent of 52 standard business days every year – chasing and collecting late invoices.
“From a broader viewpoint both the state and federal governments have been working to support SMEs, developing legislation that will help stamp out the late payments culture, providing an immense benefit to SMEs in the long term,” the company’s CEO Chris Urry said in response to the findings.
In the meantime, the report found that SMEs are finding some relief from the burden of chasing late payments by engaging with technology.
“The report found that when businesses introduced technology that automated their payment collection, not only was there a 30 per cent reduction in time spent chasing unpaid invoices, but they saved an average of $15,000 annually by doing so,” he said.