Late payment shockers: The wild excuses and brutal truths impacting small biz

Late payments are proving to be a significant headache for Aussie businesses, hindering their growth and leaving them with a financial migraine, according to the latest survey by CreditorWatch.

Results from the survey paint a concerning picture, with over 80 per cent of businesses experiencing late payments in the past six months. Shockingly, 37 per cent reported that enduring 60+ day waits for payments has become a common occurrence, leaving businesses scrambling to manage cash flow.

The survey also revealed some bizarre and creative excuses for late payments, ranging from getting hit on the head and forgetting to pay to attending the grand final or leaving a wallet in a mistress’s car. These creative justifications only add insult to injury for businesses already struggling with delayed payments.

Late payments impact most small businesses

CreditorWatch’s data on business-to-business (B2B) payment defaults in the past year indicates a median overdue period of 170 days. This delay poses a significant risk, as businesses with a single default face a 24 per cent likelihood of failure within the next year. The stakes rise dramatically to 62 per cent when a business accumulates three or more defaults, painting a grim picture for those grappling with overdue payments.

With the holiday season around the corner, businesses are bracing for a potential 20 per cent drop in revenue on average. This, coupled with ongoing economic challenges and the traditional closure of many businesses during this period, heightens the risk of encountering late payments.

Adding to the struggle, small businesses find themselves facing power imbalances when negotiating contracts, with two-thirds of respondents feeling they have less bargaining power when dealing with larger businesses.

Key survey insights include:

1. 82 per cent of businesses have experienced late or overdue payments in the last six months.
2. The highest proportion of late payments are in the Construction, Manufacturing, and Information, and Media and Telecommunications industries.
3. Administrative and Support Services had the highest proportion of late payments in the ‘less than 10 days range.’
4. 37 per cent of businesses commonly experience payments more than 30 days late.

Excuses for late payments range from “my customers haven’t paid me” to the more creative “I got hit on the head and forgot to pay.”

Small businesses most impacted

CreditorWatch’s CEO, Patrick Coghlan, highlighted the disproportionate impact on small businesses, emphasising that late payment rates for small businesses are, on average, three times greater compared to large businesses.

Coghlan urged businesses to take proactive measures to avoid cash flow pain.

“With the incidence of late payments and payment defaults increasing over the Christmas, New Year period, businesses should be taking proactive measures to follow up on outstanding invoices before the break,” Coghlan said.

The Payment Times Reports Register is available at paymenttimes.gov.au

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