Over 300,000 small businesses on the brink due to unpaid invoices

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Australian small businesses are struggling due to being owed billions in outstanding invoices. According to Debtplacer, a platform that connects businesses with a marketplace of debt collectors and law firms, an estimated $115 billion a year in outstanding invoices are owed to small businesses, with up to $9 billion never making it to their bank account. Given that there are 2.3 million SMEs in Australia, the outstanding invoices equate to $3913 in unpaid invoices for every SME.

“I was tired of examining the crash site, when I knew I could have helped prevent the accident,” James Cook, co-founder of Debtplacer. “By the time a case got to me, it was usually too late, but often this loss could have been prevented if the business owner had known where to turn.”

The Australian Bureau of Statistics (ABS) noted that 16 per cent of Aussies businesses admit it will be difficult or very difficult to meet their financial commitments over the next three months. This equates to 368,000 small businesses facing potential ruin.

Cook said the housing industry provides the most obvious cautionary tale for SMEs who don’t collect quickly.

“There’s a lot of stress in the construction industry at the moment – there’s been a boom, but in some cases a profitless boom,” Cook said. “I know companies that agreed to contracts 12-18 months ago and are now having to absorb very sharp cost increases, and there’s often no margins left in the job. We’ve heard of builders handing back contracts as they’re no longer profitable.”

Recent ABS data also showed that 277,674 businesses had to close their doors in the 2020-2021 financial year. Cook commented that waiting for payments can often be a death blow.

“In my experience, there is a real taboo around debt collection and as a result, too many companies leave it until it’s too late,” Cook concluded.