As the financial year draws to a close, small-business owners are frantically chasing up unpaid invoices. Australian payment times are among the slowest in the world – research conducted by Australian Small Business and Family Enterprise Ombudsman (ASBFEO) in 2020 found that SMEs typically wait an average of 56 days to get paid – but research from technology business Square indicates that situation may be getting better.
Anonymised data, sourced from millions of Square Invoices, found that invoices of between $2500 and $5000 are being paid on average within 3.9 days. Large invoices over $50,000 are being settled on average after 9.3 days, while small invoices of between $250 and $500 are clearly an “annoyance”, with average payment times of almost 14 days.
On a state-by-state level, Queensland businesses were paid fastest on average (4.3 days), whereas those in the ACT waited the longest (5.9 days). Businesses in the home and repair sector had to wait an average of 6.3 days, while the beauty and personal care industry was the most efficient – businesses in that sector had their invoices paid on average after just 3.3 days.
“Cashflow is always critical to small businesses, but never more so than right now,” Colin Birney, Head of Business Development at Square Australia, said. “For businesses looking to get paid faster, we’d recommend ensuring all invoices are sent electronically, can be paid for within the invoice to remove any friction, and that you are setting out payment terms clearly and before any work takes place, where possible.
“Businesses can also look at taking card payments for invoices in person: that ensures immediate payment and funds being available as soon as the next business day,” Birney added, pointing out that businesses who tap into Square’s ecosystem, thereby connecting payments with invoices and payables contacts, are getting paid significantly faster than the national average.
The report highlighted the plethora of excuses SME owners have been given for late payment of their invoices: Ben Neumann, Managing Director at Ellora Events, was told, “I can’t pay because I’m jet lagged.” Ronald Samson, Research Analyst at CreditDonkey was advised that the cheque to pay his invoice had “accidentally been among the toilet paper.”
Tom Holliday, Co-founder at Sonder Brisbane, was told, “We haven’t had a chance to pay any of the overdue invoices as our iMac blew over on the desk with some wind and smashed.” A debtor told Abby Ha, Head of Marketing at WellPCB, “My washing machine broke down, I’m just too busy to pay you.” And Petra Odak, Chief Marketing Officer at Better Proposals, had a response to chasing an invoice that trumped the lot – “I went to a bachelor party abroad, got drunk, lost my phone, and barely found my way home.”