Payment times blow out as businesses feel pressure of economic challenges

New research conducted by funding solutions company OptiPay reveals that businesses are taking longer to settle invoices as economic conditions worsen globally, putting pressure on SMEs’ cashflow.

The data shows that the average number of days invoices have remained outstanding invoices has increased from 31 days to 38 days in the last six months.

“This slowdown in payments is having a knock-on effect down the whole supply chain across just about all industries,” OptiPay CEO Angus Sedgwick said. “It’s a sign that businesses are under mounting financial strain and are starting to become selective about the timing of when they pay invoices.”

Sedgwick says that his firm is seeing an increase in invoice financing enquiries from SMEs who are struggling to access working capital from more traditional sources.

“With the ATO back collecting tax debts that had been put on hold during COVID, as well as the SME Recovery Loan scheme and JobKeeper ending and continuing supply chain issues, many businesses which have previously weathered the past couple of years are suddenly realising their cashflow options are now limited,” Sedgwick said.

“Banks are tightening their lending and there are no more government handouts so unfortunately pain is on the way for many SMEs,” he added.

The research reports 3917 liquidations or administration appointments among Australian companies in 2021-22, with more businesses failing in NSW than anywhere else in the country, followed by Victoria. Over a quarter, 28 per cent, of these insolvencies occurred in the construction industry.

“I think this is just the beginning,” Sedgwick said. “I expect we’re about to see insolvency levels go through the roof and the next two years are going to be really hard for business. We know the construction industry is doing it tough but we’re also seeing ripples across most industries.”