More than half of Australian SMEs paid late

posted by Charlie Hart
24 June 2019

Late payments to Australian SMEs total $115bn each year, presenting a ‘systemic problem’ for small businesses, a report said.

The report, by software provider Xero, revealed over half (53%) of invoices issued to large businesses for goods and services provided by SMEs in Australia were paid late.

Xero analysed over 10m invoices issued to large businesses by more than 150,000 small businesses. It found SMEs were paid on average 23 days late by large businesses.

It estimated the total value of late invoices at $115bn each year.

The analysis uncovers a “systemic problem” with late payments to small businesses, the report said.

SMEs' revenue growth was hit by late payment, with businesses that were paid late growing one third slower than those who were paid in a timely manner, the report said.

Problems arise for businesses enduring long waits for payment as they must bear the cost of producing the goods or services sold to the customer as well as the overheads associated with running a business, it continued.

“This differential can quickly create cash flow and financing pressures,” the report said.  

Xero also said slow payment times may also have a domino effect through the economy.

It said SMEs that are paid faster than average pay their own suppliers eight days sooner than those paid more slowly, lowering average payment times by SMEs from 18 days to 10 days.

Angus Capel, small business advocate at Xero, said: “We can no longer accept it as the status quo that Australian small business carries billions of dollars of debt for big business. The $115 billion of late payments identified in the report equates to around $52,000 owed to each small business in Australia.

“Unlocking this capital for small businesses 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.”

Earlier this year, the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell said large businesses needed to be more open about their payment times.

“There is a persistent trend in Australia of payment times being extended beyond usual industry standards,” she said.

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Insight Executive Group
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