Published on Dec 13, 2016

Feel free to share

account-overdueDo you struggle to get payment from debtors? Are customers letting your invoice roll into 60, 90 or even 120 days?

It’s a cycle that many Australian businesses find themselves in.

MYOB’s SME snapshot showed that 77 percent of small businesses operators routinely experience late payments from customers, including from big businesses.

The impact of late payments isn’t restricted to business impacts. Cash flow problems lead to impacts on business owner’s personal finances and this can affect an owner’s ability to pay for basic living expenses.

The stress caused by dealing with late payment is considerable, with MYOB finding that 52 percent of SMEs feeling anxiety as a result.

Small and medium enterprises are often running on tight margins where several overdue accounts can stretch the business to breaking point.

There are a number of reasons for late payment, including debtors having cash-flow problems of their own, but many businesses surveyed by MYOB also felt that there is simply a lack of regard for terms and conditions rather than cash-flow issues.

Small Business Ombudsman Kate Carnell also stated earlier in the year that larger companies are guilty of ignoring payment terms of small businesses and delaying payments despite having the funds to pay on time.

In a survey of businesses, Veda, one of Australia’s largest credit analysis companies, found that small businesses with between 10 to 50 employees pay the bills the fastest, while large businesses of over 100 employees paid the slowest.

In order to tackle this crippling issue, the Council of Small Business Australia have put forward a call for the development of a national prompt payment protocol, which would lead to businesses voluntarily signing the agreement.

Businesses that sign such a protocol would be publicly recognized for doing so.

The NSW Government through the Office of the NSW Small Business Commissioner offer two support initiatives to help combat the overdue payments issue.

  • The 30 days to Pay Policy stipulates NSW Government agencies are required to pay correctly rendered invoices to small businesses registered with the government agency within 30 days.
  • Dispute resolution services are also a valuable tool for small businesses with debt recovery issues. The commercial dispute resolution service is completely confidential, offers free advice and if a situation requires a formal mediation the service is offered at a substantially discounted rate.

To continue building strong relationships between Councils and small businesses the NSW Business Chamber and the Office of the NSW Small Business Commissioner have implemented the Small Business Friendly Program.

As a member of the Small Business Friendly Program Cessnock City Council demonstrates an ongoing commitment to supporting local small business.

The Small Business Friendly Program ensures Council:

  • maintain an on-time payment policy
  • conduct periodic consultation about small business issues and opportunities with key stakeholders from the community
  • provide quarterly progress reports outlining Council initiatives.

Staying on top of your debtors:

  • Make sure your credit policy is clear and covers all the bases
  • Ensure your invoice is easy to read – have your terms, invoice date and number and ABN clearly marked on the invoice
  • Know your debt collection regulations, and how often you can call a debtor to request payment
  • Keep track of your late payers so that you can manage your budget accordingly
  • Follow up on invoices before they are due
  • Withdraw credit from delinquent customers

For more information go to NSW Small Business Ombudsman or The Council of Small Business.