Credit Management
Leveling the playing field for Aussie small businesses By Adrian Floate*
Australia’s payment problem It’s estimated that 82% of retailers close down due to poor cash flow. You might think that ‘poor cash flow’ relates solely to a lack of sales or leads. In reality, many businesses are actually selling a substantial amount of products, but the time it takes to receive payment for these items causes significant financial strain. This is where the hidden culprit in Australian business transactions is exposed, inefficient payment collection processes.
A staggering 53% of all invoices sent between Australian businesses are paid late by an average of 23 days. Another 20% has an incorrect amount,
Adrian Floate
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CREDIT MANAGEMENT IN AUSTRALIA • July 2020
while another 20% are paid to the wrong business entirely. For larger businesses with millions of dollars in equity, these late payments don’t cause critical strain. They have the funds and diversified revenue to survive the wait, and the resources to work through payment errors. For smaller businesses with lower cash flow however, the long wait between receiving cash for goods sold, coupled with payment inaccuracies can cripple their entire operation. Australian businesses exchange approximately 1.2 billion invoices annually with around 20 percent of those (240 million invoices) being debt owed to small business suppliers. With 53% of those payments arriving late, there is a huge amount of stagnant money not going to the businesses who need it. It means at least 127 million invoices are paid late each year to small businesses.
