We are calling on big businesses to recognise the impact their late payments are having on the small-business economy, with new data showing more than 3.8 million overdue invoices payable to small businesses.
The data, collected from millions of invoices across Australian Xero small businesses over the past six months, reveals that big businesses are major culprits of the cashflow gap, with one in five invoices payable by ASX 200 companies to small businesses overdue by more than 30 days. When big businesses fail to pay on time, small businesses are forced into a cashflow gap, which puts pressure on businesses that don’t have the resources to fund the gap.
Small businesses are significant drivers of the Australian economy, but it goes without saying that a business in negative cash flow can’t grow. When you extrapolate that fact across our small business sector, it has a startling flow-on effect for the entire economy.
Late payments are pandemic, with 65 per cent of small businesses having invoices overdue by more than 30 days at any time in the last six months and 56 per cent of small businesses currently having invoices overdue by more than a month.
With media reports suggesting that major enterprises are putting the squeeze on their small-business suppliers with lengthy payment terms, I believe it was time to fix the cashflow gap and help small businesses.
“As a small-business owner, I’ve learned not to assume that big businesses will pay within 30 days,” said Hannah Spilva, founder of same-day gift service LVLY. “Late payments have a huge impact on cashflow, which leads to other problems down the line, like struggling to pay your suppliers, staff, or even yourself on time.
“This is a problem a lot of small businesses have to deal with. We’ve worked with our accountant to set up a clear framework and implement tools like Xero that provide another layer of support by giving me a snapshot of my business’ cashflow and outstanding invoices that need following up,” Spilva said.
With an inquiry into late payments by the Australian Small Business Ombudsman (due to report next month) and talk around a voluntary payments code, it’s clear something needs to be done.
Australia has fallen behind on the global front. The UK has a payments code that pushes big business to pay invoices within 30 days while the US’ SupplierPay initiative sees large companies pledge to pay small businesses within 15 days. No such pledge or commitment exists in Australia as yet.
We’re significantly failing our small businesses. We need to do more and we need to do better by them.
Trent Innes, Managing Director, Xero Australia
