4 late payment facts keeping SME owners up at night

Late payments are an unfortunate reality of running a business, and most SME owners have contingency plans to keep cash flow healthy if some clients are slow to settle their debts.

But unpaid invoices can quickly pile up and begin having an impact on your ability to pay your own bills. We examined some of the latest research to bring you four late payment statistics to encourage you to prioritise cash flow management.

1. 29 per cent of start-ups fail because they run out of cash

The main cause of new business insolvencies is a lack of market need for the offered services, according to research from CB Insights. More than four out of ten start-ups go under for this reason.

However, poor cash flow ranked second, with 29 per cent of budding businesses found to have simply run out of money. In the 2015-16 financial year, the Australian Securities & Investments Commission reported that 46 per cent of organisations cited cash flow problems as their reason for failing.

2. Over half of SME owners are stressed about late payments

Unpaid invoices aren't just an inconvenience for many SME owners, they can cause significant financial pressures that lead to an emotional toll.

MYOB research shows that 52 per cent of SMEs reported stress and anxiety over late payments. Moreover, 35 per cent said client debts were having a direct impact on their personal finances.

3. Australia is the slowest country in the world at paying invoices

Recent illion data revealed the average late payment time in Australia has dropped nearly 10 per cent over the last year, which is positive news for the country's SMEs.

Nevertheless, the nation is apparently still the slowest in the world at settling business debts, according to UK finance company MarketInvoice. The average invoice is paid 26.4 days late in Australia – nearly eight days later than the next most-tardy nation, Mexico.

4. SMEs are owed $76 billion collectively

The Invoice Market estimates that Australia's 2 million SMEs have $76 billion worth of unpaid invoices dragging them down. This represents approximately $38,000 per business.

Around 14 per cent of SMEs are owed more than $100,000 each from debtors, a separate study from the Australian Small Business and Family Enterprise Ombudsman found.

Take steps to protect your cash flow

While the above statistics are concerning for start-ups and other small businesses, SME owners can take a proactive approach to late payments.

Please contact WMC Accounting to learn more about our cash management and forecasting options, as well as a range of other business advisory services.