Late payments to Aussie small businesses improve

Xero, the global small business platform, reports that late payments to Australian small businesses have seen an improvement. An analysis of hundreds of thousands of anonymised invoices by Xero Small Business Insights reveals a nearly 2.5-day decline in late-payment times in July across Australia — the biggest June-to-July drop in three years.

Businesses waited just over 33 days on average to be paid on a 30-day invoice. While that’s still three days late, it’s the best figure since Xero Small Business Insights started recording late payments in 2014. The improvement comes as several changes arise in the small business sector. They include faster payouts on federal government contracts and heavier use of payment services by small businesses.

“We’re pleased to see these faster payments, and we’ll be monitoring the effect on small businesses as we go forward,” said Trent Innes, Managing Director, Xero Australia and Asia.  “When a small business gets paid sooner, it has a measurable, positive effect.”

A recent Xero Small Business Insights special report, Paying the price, found that Australian businesses paid sooner than average grow revenue about 40 percent faster than those paid slower than average. Business paid faster also tend to pay their own suppliers about eight days sooner.

In July, 54.6 percent of businesses were cash flow positive, which is the most recent month of data available from Xero Small Business Insights. It’s also the best July reading on record at Xero.

While the government’s efforts are important, other factors may be contributing to the changes in Xero data. For example, the same special report  encouraged firms to add a payment service to their invoices to get paid sooner.  And Xero saw a sizeable jump in Australian invoices settled with online payment services in July.

The shift in payment times is clearly a positive sign, but it’s only a start.

“There’s still much work to be done outside of government,” said Innes. “Small businesses tell us that big businesses are their slowest paying customers by far. So it’s important that we keep putting pressure on everyone to pay their invoices on time.”

Half of all invoices issued by small business to big business are paid late, Xero data suggests. These total more than $115 billion a year, or about $52,000 for every small business in Australia.