(6 March 2025 – Australia) Small to medium sized enterprises (SMEs) are suffering from late payments by large corporate clients exacerbating ingrained cashflow constraints.
Delayed invoices have surged to their highest level in four years, limiting investment and in many cases resulting in insolvency The Age reports. Larger sized corporates are dragging their feet on small business payments, stretching payment times from 30 to 90 days plus.
With business-to-business payment defaults more than doubling in the last year, this places considerable strain on cash flows making it more challenging for SMEs to stay in the black.
Beyond cash flow constraints for general operations, late payments also prevent SMEs from investing in their business for growth, highlighting a crucial “knock on effect” from the sizeable opportunity cost.
“It’s about trying to stem that contagion effect; it just wipes you out. It takes a while to play out through the system because you’re waiting on one late payment to trigger the next, but the pressure builds each time” commented McGrathNicol Partner, Kathy Sozou.
“If the developer falls over, suddenly every supplier in that chain that was reliant on them is exposed. If you’re manufacturing all the windows for the developer, but suddenly there’s no construction for a year, what are you doing? It just wipes out entire vertical lines of supply chains.”
“Small businesses should perform their due diligence and be more selective before entering into contracts. If I’m now putting many eggs in that basket for that business – are they credible? Are they financially stable? There’s that counterparty risk, and people want to know who they’re doing business with” Sozou added.
“On top of this pressure, a weak economy means SMEs are trapped in a “perfect storm”. They have huge bills, but at the same time they’re dealing with inflation and high interest rates too” stated Moneytech CEO Nick McGrath.