Cashflow crisis grips 3 in 4 Australian SMEs as late payments surge: Airwallex
A new report from Australian-founded global financial platform Airwallex has revealed the growing financial strain facing small and medium-sized businesses in Australia, as rising operating expenses and delayed customer payments continue to erode cash flow and business stability.
Based on research from 500 SME owners and decision-makers in Australia, the study found that over 3 in 4 SMEs (77%) have faced a cashflow crisis within the past 12 months. Among them, 42% identified rising overheads, including wages, rent, and utilities as the primary cause, with over a third (34%) reporting that cost of living pressures have increased in frequency and severity in the last year.
Late payments from customers were cited by a third (32%) of Australian SME owners as a key contributor to cashflow issues, while 14% pointed to restricted access to credit or external financing.
The findings reflect wider market conditions, with Reserve Bank of Australia data showing small business insolvencies have climbed steadily over the past decade, and business loan approvals have tightened as interest rates remain high.
Industry breakdown: where the pain is worst
The research revealed that some sectors are feeling the burden of late payments more acutely than others:
- Healthcare had the largest proportion of owners losing $5,000+ each month to late payments, almost one in 10 businesses
- Architecture, engineering and building is the worst overall affected, with nearly half (44.12%) losing between $3,000 and $4,999.99 monthly
- Sales, media and marketing leads for businesses often report delaying payments to suppliers due to cashflow issues (48%), followed by HR (42.86%) and Education (38.71%)
- Travel and transport (26.32%), Sales, media and marketing (25%) and Education (23.33%) most often report that late payments cause significant delays in paying staff and suppliers
- Profitability also varies sharply by sector, with Legal most consistently profitable (60%), followed by Sales, media and marketing (52%) and Manufacturing and utilities (46.51%); conversely, Healthcare is most likely to operate at a loss (6.82%) and HR is most likely to break even but turn no profit (28.57%)
Businesses dipping into savings and borrowing privately
To cope with cashflow challenges, many SMEs are resorting to personal and high-risk financial measures. Over half (52%) reported dipping into personal savings to cover operational costs, with 34% taking out business loans to manage shortfalls.
Alarmingly, nearly a quarter (24%) admitted to relying on personal credit cards or loans, while 15% said they have borrowed from friends or family, a stark indication of the financial and emotional pressure business owners face.
Top Five Ways SMEs Are Managing Cashflow Problems:
- Savings – 52%
- Business loans – 34%
- Business credit cards – 33%
- Invoice financing – 26%
- Personal credit (such as loans and credit cards) – 24%
Matt Paterson, Head of Sales, SME & Growth, Australia, Airwallex, said, “While it’s important to have savings buffers to manage cashflow challenges, the reliance on debt products is a sign of the sustained pressure small business owners are under. The key is striking a balance, ensuring strategies are in place to safeguard cash reserves while also accessing the right financial tools to bridge short-term gaps without jeopardising long-term growth.”
Late payments are causing significant financial losses
Late customer payments remain a persistent and costly issue for Australian small business owners. Over half (52%) said late payments cost them at least A$2,000 every month, equating to A$24,000 annually. Businesses generating $100,001-$250,000 in monthly revenue are the worst affected, with a quarter (25%) reporting that late payments cause significant delays in paying staff and suppliers.
While the financial burden plays a big role in the success of a business, the research also revealed how much time SME owners spend dealing with late payments. The effort required to pursue late payments is draining valuable time from business owners, with over half (54%) confessing they spend up to five hours a month chasing overdue invoices. Meanwhile, almost a fifth (19%) said it takes between six to 10 hours, which is valuable time that could be invested in growth and operations. Across the year, this could be up to 60 hours SMEs could be spending on their business growth, which is almost equivalent to two working weeks for the average Australian.
When tackling non-paying clients, SMEs are deploying a mix of approaches:
- 59% send reminders and follow-up communications
- 39% offer payment plans or negotiate new terms
- 32% enforce late payment fees or interest charges
- 17% escalate to debt recovery or collections agencies
- 15% end up taking legal action
Overall, 43% of SMEs said they occasionally write off unpaid invoices, while less than a tenth of respondents (8%) do so frequently, signalling a level of revenue loss that many businesses are ill-equipped to absorb.
Paterson added, “SMEs are vital in helping the Australian economy, but many are operating on a knife-edge due to rising costs and unreliable customer payments. Cashflow gaps shouldn’t be forcing business owners to dip into personal savings or take on avoidable debt.”
“These insights highlight just how urgently we need better tools and support for small businesses to manage finances more efficiently and sustainably.”
