Adrian Floate 9 February - 2 min read
Australian small to medium businesses (SMEs) have a cash flow problem and despite government legislation implemented on 1st January 2021, many may not survive if lockdowns and trading restrictions continue.
Late invoice payments are the number one cause of poor cash flow for SMEs with many reporting they only have enough cash flow to survive for three months or less.
Inefficiencies in operational processes and payments practices plague many businesses and directly contribute to cash flow problems where, on average, Australian businesses are now taking 34 days to pay their invoices.
Following the 2020 lockdowns in Perth and across the Country, thousands of businesses closed their doors as a result of fewer customers and lost revenue. The SMEs that survived were those that had reliable insight into their cash flow and could make critical business decisions based off of these predictions.
With COVID-19 restrictions currently being reinforced in Western Australia and Victoria, and as general fears globally about the long-term viability and sustainability of SMEs continue to grow, it’s important for owners to keep track of money moving in and out of their business and do things today that support the cash flow predictions of tomorrow.
The government’s new Payment Times Reporting Scheme is a step in the right direction and aims to help small businesses get paid sooner, but in isolation it is unlikely to be enough.
Under this Scheme, businesses with a total annual income of over $100 million will have to report publicly on how and when they pay their small business suppliers – helping Australia’s 3.5 million small businesses make more informed decisions about who they do business with. Additionally, payment policies have been shortened to 20 days.
While new regulation and policy developments will help shift the long-term culture around business payments, fintech innovation and new technologies will help SMEs address their cash flow challenges now.
It becomes more important than ever before to start building resilience in your business by investing in good technology that supports all aspects of your business, from ordering, through to invoicing and payments.
At Spenda, we’re helping businesses make late payments a thing of the past and delivering transparency of payment practices by connecting the buyer and seller through ledger-to-ledger integration to ensure they are working from a single source of digital truth.
This ultimately saves time, money and resources for both parties while speeding up payment efficiency.
The Payment times and Reporting Scheme took effect on 1st January 2020 and businesses are required to get their payment practices in order within six months before the first reporting window opens and reports become available to the public.
Chasing late invoice payments is a burden for any business, and still, more than half of B2B payments in Australia continue to be processed late, costing businesses, on average, $115 billion every year.
When you’re running a large operation with hundreds of invoices processed each month, the resources required to manage your payments grow quickly, especially when ageing receivables become a problem. While customers may not pay their invoices for various reasons, it happens too often, causing a range of challenges and increased risk.
Digital payments helped businesses get paid safely and efficiently throughout the COVID-19 lockdowns and associated restrictions. But as economies reopen many challenges still face businesses including supply chain disruptions, the ‘great resignation’, rising inputs such as fuel, and the expense of reopening. These business challenges make now an opportune time to build on the processes optimised throughout the pandemic, especially across B2B trade.
© 2022 Spenda. All rights reserved