The impact late payments can have on a small business have been detailed in a new survey from MYOB.
The company’s latest SME Snapshot, which surveys a section of MYOB’s 1.2 million customers, reveals the majority of businesses do not simply cushion the effect of late payments, with more than three quarters (77%) saying they felt some sort of impact compared to 23% that experienced no impact.
According to the survey, the impacts of late payments are not solely business-related, with 52% of businesses experiencing stress and anxiety due to late payment.
More than a third of business owners say their personal finances are effected, and 32% say late payments hinders their ability to cover expenses such as rent and power.
Of concern, MYOB’s previous SME Snapshot found 54% of small businesses have previously waited over six months to be paid by a customer, with around seven in 10 writing off money owed to them.
MYOB CEO, Tim Reed, says it is unfair that that many small business owners are being subjected to late payments in addition to the daily challenges of running their own business.
“The financial health of Australia’s small business owners should be a top priority and the research indicates this also has a direct impact to their own personal wellbeing,” he notes.
The survey also looked at the main reasons for late or slow payments, with more than half or respondents (52%) noting it indicated a lack of regard for invoicing terms and payments processes, while 46% said cashflow issues among customers was the main reason.
“We know from previous MYOB research that cash flow concerns are consistently a top pain point for SMEs, but the lack of regard for their external terms and processes highlights a new concern for these business operators,” says Reed.
MYOB highlights the Council of Small Business of Australia (COSBOA) recently called for the introduction of a voluntary code to encourage businesses to pay more promptly, where signatories voluntarily agree to abide by the rules of the protocol and are publicly recognised for doing so.
Interestingly, 72% of respondents in the SME Snapshot support this idea.
“Given the overwhelming support for this initiative, it would be a positive move to see the government and big businesses to put forward an initiative to implement a national prompt payment protocol to ensure small businesses are not being delayed payments by other businesses,” says Reed.
The CEO of COSBOA, Peter Strong, highlights some big businesses are taking more than 90 days to pay an SME despite agreed payment terms being 30 days.
“This can be the difference between insolvency and a healthy business continuing to operate,” he warns.