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Australian SMBs lose two business weeks annually to late payments, report finds
Borrow
Australian SMBs lose two business weeks annually to late payments, report finds
In a startling revelation, the latest report by GoCardless, a global bank payment company, highlights the crippling impact of late payments on small and medium businesses (SMBs) across Australia. The 'Pursuing Payments' report, based on a survey of 500 SMB owners and decision-makers, paints a grim picture of how late payments are not just a financial nuisance but a significant drain on productivity, growth, and personal wellbeing.
Australian SMBs lose two business weeks annually to late payments, report finds
In a startling revelation, the latest report by GoCardless, a global bank payment company, highlights the crippling impact of late payments on small and medium businesses (SMBs) across Australia. The 'Pursuing Payments' report, based on a survey of 500 SMB owners and decision-makers, paints a grim picture of how late payments are not just a financial nuisance but a significant drain on productivity, growth, and personal wellbeing.
Time lost to chasing payments
The report uncovers that a staggering 63% of Australian SMBs spend time chasing payments, with the average time lost amounting to 1.5 hours per week. This equates to approximately 78 hours annually, or over two full business weeks, dedicated solely to payment administration. This hidden time tax is a silent productivity killer, with 41% of businesses experiencing delays of more than 14 days past the due date, and 17% waiting over a month for payments.
Ian Boyd, General Manager for Australia and New Zealand at GoCardless, emphasised the detrimental impact of these delays, stating, "This report is a critical warning for the Australian economy. Late payments aren't just an inconvenience - they're actively suppressing growth, forcing businesses into debt, and taking a significant toll on the mental health of business owners on a massive scale."
The cost of avoiding difficult conversations
The survey also reveals that almost one in four (23%) Australian SMBs are willing to write off 6% or more of their annual turnover to avoid awkward conversations about late payments. This avoidance behaviour is particularly prevalent among younger business leaders, with 38% of Gen Z and Millennial owners willing to forfeit a significant portion of their turnover, compared to just 16% of older decision-makers.
Boyd further commented on this avoidance trend, noting, "Despite this, 68% of businesses still say late payments are an ‘inevitable’ cost. This mindset needs to change if businesses want to take back control."
Turning to debt as a stopgap
The financial strain of late payments has forced 34% of Australian SMBs to resort to credit cards or loans in the past year, effectively paying interest on money their customers already owe them. This reliance on debt as a cashflow strategy is not sustainable and underscores the urgent need for solutions to the late payments crisis.
Boyd highlighted the potential of technology to alleviate this burden, stating, "Our study reveals that 70% of SMBs are interested in technology solutions to reduce the volume of late payments, and we already have that tech. For example, automated payments, like Direct Debit, that pulls the funds on the day they’re due."
The personal toll on business leaders
Beyond financial implications, the report sheds light on the personal toll late payments take on business leaders. Among those who avoided payment conversations in the past year, 38% reported increased workplace stress, while 36% experienced heightened personal stress. Additionally, 24% of businesses noted that late payment issues have strained customer relationships, perpetuating a vicious cycle of avoidance and stress.
Boyd underscored the broader implications of the findings, stating, "Late payments are a complex issue but small businesses everywhere can take steps today to combat the growing burden of late payments."
The 'Pursuing Payments' report serves as a stark reminder of the pervasive issue of late payments in the Australian SMB sector. As businesses grapple with the dual challenges of financial strain and personal stress, the call for change is more urgent than ever. With technology solutions readily available, the opportunity exists for businesses to reclaim control over their cashflow and mitigate the silent cashflow killer that is late payments.
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