Late payments causing more than a headache for SMEs

New research from MYOB has found a majority of Australian small-business operators experience both business impacts and personal challenges due to late payments.

The latest SME Snapshot from cloud accounting provider, MYOB, revealed 77% of businesses had felt some sort of business impact due to a customer not paying their bills on time, while only 23% saw no impact at all.

The effects of late payment include impacting business owners’ personal finances (35%) and the ability to cover expenses such as rent and power (32%).

Late payment also takes an emotional toll on SMEs, with 52% confirming it impacts their stress and anxiety levels. Mr Tim Reed, CEO of MYOB said the results indicate a clear call for action.

“It’s unfair that many small-business owners are being subjected to late payments on top of the day-to-day challenges of running their own business. The financial health of Australia’s small-business owners should be a top priority and the research indicates this also has a direct impact to their own personal wellbeing.”

“Improving this situation to ensure all businesses are being paid on time should be a shared responsibility across Federal Government and businesses of all sizes,” said Reed.

The survey also found that 72% of small-business owners were in favour of introducing a voluntary code to encourage businesses to pay more promptly.

“Given the overwhelming support for this initiative, it would be a positive move to see the government and big businesses to put forward an initiative to implement a national prompt payment protocol to ensure small businesses are not being delayed payments by other businesses.”

This follows a recent call to action from the Council of Small Business Australia (COSBOA) calling for the development and implementation of a national prompt payment protocol where signatories voluntarily agree to abide by the rules of the protocol and are publicly recognized for doing so.

“Some big businesses are taking more than 90 days to pay an SME despite agreed payment terms being 30 days – and this can be the difference between insolvency and a healthy business continuing to operate,” said Mr Peter Strong, CEO of COSBOA.

When asked what they thought the main reason for slow or late payments were, 52% of survey respondents indicated a lack of regard for invoicing terms and payment processes. This was followed by almost half (46%) of respondents nominating cashflow issues among customers.

“We know from previous MYOB research that cash flow concerns are consistently a top pain point for SMEs, but the lack of regard for their external terms and processes highlights a new concern for these business operators,” added Reed.

These findings echo previous MYOB research from last month’s SME Snapshot, which revealed 54% of small businesses have previously waited over six months to be paid by a customer, with more than seven in 10 writing off money owed to them.

Inside Small Business

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