New research from the global small business platform Xero and AlphaBeta Advisors reveals the significant impact that late payments have on small businesses in Australia.
The research goes as far as putting a dollar value on the amount outstanding of $115 billion per year. According to the research, half of all trade credit invoices are paid late (settling on average 23 days after they are due). With small business issuing $216 billion in invoices each year, this equates to $115 billion in late payments. If these invoices are paid on time, Xero describes the impact as being equivalent to transferring $7 billion in working capital from large businesses to SME’s.
Xero Managing Director Trent Innes is quoted below:
“Late payments are the scourge of small business, and being able to name the staggering figure of $115 billion for the first time gives fresh urgency to solving the problem. We call on big business and government to prioritise this issue. Our research finds that addressing the fundamental inequality of small business carrying $115 billion worth of debt on behalf of big business will deliver a significant benefit of $4.38 billion to SMBs over a decade .”
The research suggests that through lower financing costs and increased investment opportunities would see the SME sector benefit by $4.38 billion over 10 years – a significant boost to the economy.
As we are all aware, late payments and cash flow issues are a significant source of pain for SME’s. When a business is paid late there is always a knock-on effect. Businesses are hampered in their ability to invest, grow, employ – and even meet their obligations.
According to the report, the $115 billion of late payments identified equates to around $52,000 owed to each small business in Australia.
“Unlocking this capital for small business to use will give a significant stimulus to the economy. Faster, predictable payments will generate greater stability and confidence amongst the small business sector. Small businesses will grow faster, have better cash flow, employ more people and take on more business risk.” Trent Innes, Xero
For the first time this research helps draw a direct link between late payments and slower growth for small business. With poor cash flow the primary reason for business insolvency in Australia, the issue cannot be ignored.
Invoice finance is a great option for SME’s working with big business. An invoice finance facility gives a business access to funds from their own invoices straight away. Payment certainty leads to smoother cash flow and the ability to deliver on obligations as well as invest in growth.
It is clear from the research that improving the timelines of payment is crucial to the health and success not only or SME’s, but also our economy.
Read the full report here.
Talk to Apricity today to find out how an invoice finance facility could help your business improve cash flow by getting the funds from your invoices back into the business sooner.