Late payments creating mental toll for cash-strapped small business owners
Letting invoices go unpaid has a significant mental toll for small business owners, according to a new survey that ties late payments to soaring stress levels.
Letting invoices go unpaid has a significant mental toll on small business owners, according to a new survey that ties late payments to soaring stress levels.
New data from payments processing firm GoCardless frames the late payment epidemic as not just a financial hassle, but a significant contributor to stress and discomfort among small business operators.
More than a quarter of Australian businesses (27%) said they lose up to $6,000 a year due to late payments, with 11% declaring losses of between $12,001 and $30,000.
Those figures, drawn from a survey of 515 small business decision-makers, reflect the long-established relationship between cashflow and business viability.
The GoCardless report goes further, explicitly linking late payments — and the difficulty of chasing down late invoices — as a significant contributor to small business stress.
Many small business owners delay tough conversations with their customers because they fear offending them or losing their future business, the survey found.
Millennial and female respondents said they were more likely than their older, male counterparts to put off a tough conversation about overdue invoices.
Ultimately, 43% of small business leaders said their decision not to have those conversations elevated their stress levels.
“As we live through the most significant cost of living – and cost of doing business – crisis of the last decade, getting paid on time has never been more important,” said Luke Fossett, ANZ manager for GoCardless.
“But talking about money is something that many Aussies still feel awkward about, creating profound personal and professional consequences.”
Government proposes new payment regulator powers
GoCardless, which offers recurrent payment functions to businesses, says systems like its own can benefit SMEs on the wrong end of late payments.
Lawmakers are currently pursuing their own regulatory solutions to the problem.
It takes an average of 35.4 days for a small business supplier to receive payment from its big business customers, with average payment terms stretching to 43 days for manufacturing businesses, according to the Payment Times Reporting Regulator.
The federal government — which wants to see average payment times well below 30 days — this week revealed draft legislation it says would dramatically strengthen the Regulator’s powers.
Following a statutory review that found the system needs “fundamental reform”, the draft legislation proposes a clearer pathway to civil penalties for businesses that do not comply with the scheme.
It also proposes giving the Regulator new functions to undertake and publish research on payment times, both to the Commonwealth and the public.
And, in a significant expansion of the scheme, the slowest-paying big businesses could be forced to name and shame themselves on their own websites.
“This will be a shot in the arm for small businesses with faster payment times improving cashflow, alleviating administrative burdens and reducing financing costs,” Minister for Small Business Julie Collins said Monday.
“This will be good for small businesses, good for the millions of Australians they employ, and good for our country, with the boost to productivity flowing through to increased profits and more local jobs.”
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