Payment issues causing business survival concerns

More than half of Australian businesses struggling with innovation on payment issues have severe concerns about near-term survival, according to new research released by American Express.

The research found 59 per cent of companies yet to widely modernise payment practices were at significant risk of failing in the next three years, whilst another 19 per cent were at moderate risk of collapsing.

The American Express Payment Revolution research revealed that around half of all Australian businesses struggled with making payments to suppliers (44 per cent) or receiving payments from customers (48 per cent).

The survey also found security fears could be scaring-off small businesses from using new, potential helpful payment technologies.

Small businesses, those with revenues between $2 million and 10 million, were significantly less likely to consider or deploy technologies such as blockchain, Bitcoin, P2P payment, virtual card numbers and mobile wallets in the coming years.

The survey found that concerns about security (49 per cent), implementation (40 per cent) and staff adoption (36 per cent) were the biggest technology barriers to new technology adoption. They were also reticent about other measures, which could overhaul payment processes with 50 per cent of small businesses saying they did not have the right skills to make changes, 40 per cent said competing business priorities would be an issue and 36 per cent said they didn’t have the budget to make changes.

While none of these technologies in isolation would solve small business issues with payment, it certainly highlights the challenges they face in tackling finance issues. Many small businesses struggled with payment. Only 50 per cent said they felt they were effective in paying suppliers, while only 47 per cent said they were effective in chasing payments from customers. By comparison, 73 per cent of big business said they were good at paying suppliers and 63 per cent were good at chasing up customers. Overall, small business were more susceptible to payment issues than bigger business.

Payment issues were among a handful of financial challenges causing the finance department concerns about future viability. Almost a half of small businesses are worried about their business being at risk of failing in the next three years. Some 18 per cent of finance department respondents said the risk was significant, while 29 per cent said the risk was high.

The Payment Revolution research included a survey of 355 Australian CFOs from businesses with annual revenue values between $2 million and $300 million from 15 different industries. One third (30 per cent) of these businesses were unable to reconcile supplier invoices at least every other month.

Martin Seward, ‎Vice President for Small & Medium Enterprises at American Express Australia, said it was critical that these struggling companies changed their approach to payment.

“We are approaching a financial event horizon for many Australian businesses. The research tells us they can’t sustain this outdated approach to managing payments much longer,” Seward said.

“The most alarming part is that the Payment Revolution research shows that a lot of this concern is avoidable. Companies that push through changes to payment processes not only survive, they thrive.”

The Payment Revolution research found businesses that embraced emerging payment technologies were almost twice as likely to pay suppliers on time, more than two times better at managing cashflow and three times better at processing payment than other businesses.

These early adopters were also almost twice as successful at customer retention as those with poor payment practices and they expected to see a business revenue increase of 20 per cent or more during the coming year.

Inside Small Business