Late payments leave many SME owners unsure if they can pay their bills

Research from recurring payments specialist GoCardless has revealed that 75 per cent of Australian SME owners said they can’t be sure they’ll be able to pay their own bills on time due to unpaid invoices. What’s more, 62 per cent have had to sacrifice salary, holiday or hiring due to late payments. Late payments are an ongoing battle for Australian SME owners and delayed payments directly impacts businesses, and owners, but also has a negative ripple effect from one business to another.

The GoCardless research surveyed 250 SMEs across Australia on the challenges and impacts of late payments to business owners.

The research findings found that late payments are the second biggest concern for Australian SME owners, after rising labour costs. Over 80 per cent of this group admit that they would be able to grow their business faster, and sleep better if they had greater certainty about when their payments would come in.

According to results from an Inquiry conducted by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), almost 50 per cent of small businesses experience late payments on at least half of the bills owed to them. The Inquiry also found that almost 70 per cent of respondents reported that the practice has reduced business profitability, with many business owners acknowledging it has a serious impact on their mental health given the added stress and anxiety late payments – and the associated cash-flow problems – can trigger.

The GoCardless research also revealed the following:

  • 88 per cent of SME owners consider certainty around payments to be valuable or essential to their business.
  • 83 per cent agree that uncertainty around when payments will come in will make them more stressed and anxious.
  • More than 70 per cent agree that it means they can’t grow their business in the way they want or make the best decisions for business due to late payments.
  • 43 per cent have had to use emergency or personal finance due to late payments.

Joseph Robins, Australia Country Lead of GoCardless said, “It’s unacceptable for small-business owners to have so much uncertainty around their payments. Late payments are one of the main challenges faced by Australian SMEs. When late payments result in business owners taking emergency finance or not being able to pay their bills on time, it’s time to do things differently. Currently, only 32 per cent of Australian SMEs are using tech solutions to ensure they’re paid on time.”

Robins added, “Australian businesses need more certainty around when they get paid and Direct Debit is a great way to overcome problems associated with late payment. Business owners should be able to focus on running and expanding their business, not spending days chasing unpaid invoices.”

According to Melbourne-based specialty hot chocolate maker Mörk Chocolates, resolving cashflow issues is an ongoing priority for the business.

“With bank transfer, we’re reliant on the customer remembering to pay, and cash on delivery presents a host of problems around driver safety, accounting errors and manual admin. With credit cards, we also run into problems with expiry dates and spending limits,” said Kiril Shaginov, co-founder at Mörk Chocolates.

“A Direct Debit solution like GoCardless has allowed us to save on payments admin and improve our cashflow, thus guaranteeing that our revenue can go towards the business being able to grow, without needing to hire a second person managing accounts.”

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