According to The Invoice Market, late payments are the biggest issue facing Australian small to medium businesses. With $26 million owed in unpaid invoices, these businesses spend over 12 days a year in business operations chasing unpaid invoices.
Lack of cash flow means a halt in business growth, which often leads to debt or worse, liquidation. Delayed payments are detrimental to small businesses. At a time where growth is vital, they lose their chance to exploit their full opportunity. This tends to results in businesses being pushed behind competitors. Inconsistent cash flow issues for small to medium businesses impact Australia’s innovation growth and the business economy. However, things are looking up for small to medium businesses.
The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has revealed a new inquiry into payment terms known as Payment Times and Practices. The idea is to focus on what is happening in the business world. Carnell believes that the bigger players have the power to control payment dates, and can even abuse this control. Australia has the longest payment terms in the world – with payments averaging 26.4 days late followed by Mexico with 18.6 days.
Given that 90% of all business failures are caused by cash flow problems, businesses are becoming mindful of the time spent chasing up unpaid invoices and the need for cash in the period between payments.
It is important for businesses to have a clear understanding of how they can deal with the effect these payment terms can have on their cash flow needs.
The delay in payments doesn’t necessarily have to mean slow business. Small to medium businesses need an efficient strategy to ensure they have the consistent cash flow to manage daily operations. There are various ways businesses can access the cash they need to maintain their profits and benefit from business opportunities.