Only one-third of large Australian corporates pay their invoices within 30 days - survey

Australian small businesses are disproportionately affected by late payments because they are burdened with unpaid invoices, according to Australian Small Business and Family Enterprise (ASBFE).

Only 31% of large businesses paid small business customers within 30 days, according to a recent analysis by ASBFE, while 23% took an incredible 120 days to pay their bills.

ASBFE Ombudsman Mr. Bruce Billson says that only two-thirds of big businesses aspire to pay their small business suppliers within 30 days, and those that actually do is about a third.

“About 40% of the requests for assistance that come into our office relate to payment times,” Mr. Billson said.

“A vast number of big businesses just aren’t meeting the mark and it’s causing needless harm and cashflow challenges for small and family businesses who are waiting too long to have their invoices paid.

“At a time when small and family businesses are facing headwinds, big business can play their part and help get that cash going into the business for small and family businesses that have done what they said they do. They’ve provided the service, they’ve provided the input and big businesses should pay their bills in a timely fashion.”

Manufacturing, retail trade, and the construction industries have the worst track records for paying their small company suppliers.

Analysis by ASBFEO of the data provided by 7000 businesses, many with a turnover of more than $100 million, reveals that 23% of big businesses take more than 120 days to pay their small business suppliers, 9% take between 61 and 90 days to pay, 37% take between 31 and 60 days to pay, 18% take between 21 and 30 days to pay and 13% pay their bills in fewer than 20 days.

Often when SMEs struggle to get paid on time, they attribute that fail­ure to external forces beyond their direct control, such as the market or the customer.

However, we at RIABU believe strongly that the key to getting paid on time lies in your own hands, whatever you may have been told or may be hearing from your col­leagues, customers, or lenders.

To get paid on time, you need to think about receivables as a measure of the effectiveness of your own processes, starting from how you act when you first onboard a new customer to the time their payment arrives in your bank account.

We advocate using Day Sales Outstanding (DSO) because, by relating receivables to sales, DSO provides a normalized measure of how well you are managing getting paid on time.

DSO tells you how effective your processes are. DSO also provides a firm basis for internal comparison, so that you can see how your receivables performance is improving or worsening month by month, irrespective of whether your sales go up or down.

Get more tips on effective cash flow management from our book, Let the Cash Flow. To find out more about how RIABU helps small businesses get paid on time, visit RIABU.com