Imagine you didn’t get paid for a month or two for your work...
Big businesses have used this tactic to keep cash in the bank – but how long do our corporates take to pay?
This is what Rebecca Stevenson had to say in a recent article from the spinoff website. Source: https://thespinoff.co.nz/business/17-02-2018/pay-your-bills-the-spinoff-survey-of-corporate-payment-times/
According to the recent article, big businesses have been holding back payments to SME businesses across both Australia and New Zealand. For most professional service firms with SME clients, this isn’t recent news. Many firms would have experienced this with a majority of their clients for quite some time…
An inquiry last year from Australian small business ombudsman Kate Carnell found that trades between small and big business amounted to $550 billion a year. The inquiry into payment terms for small business found “collectively Australian small businesses are owed around $26 billion in unpaid debts at any one time”. If you’re not getting paid, you’re not earning, and if you’re not earning you cannot pay your bills, employ more staff and you know, do business.
Data from the Australian Securities and Investment Commission (ASIC) shows that inadequate cash-flow is the leading reason for business failure in Australia.
This issue is commonly shared across both sides of the Tasman.
According to the above article, Xero‘s on data shows that 30% of invoices were paid more than 7 days late (based on small business customers between January 2015 to September 2017). This equates to an average of $3,000 overdue per month per small business ($36,000) per annum.
Xero New Zealand manager Craig Hudson says. “If we look to extrapolate the overall impact for all small businesses in New Zealand (based on 515,046 Stats NZ count) from this monthly average, this clearly becomes a big issue for the economy with around $1 billion overdue monthly (for invoices more than 7 days late),”.
Either way you look at it, that’s a fair chunk of cash for any Trans-Tasman business!
Imagine for a minute what a small business could do with $36,000 extra cash (or possibly even $360,000 for a larger SME) if they got paid on time?
All you have to do is look at your own firm’s cash flow to work out the difference between being paid 7, 30 or even 60 days later than the normal due date.
We even have a tool which does it for you – click here to find your own extra cash
Alternatively, you might like to download a complimentary copy of our 20 page cash flow guide called ‘It’s your money don’t play bank'. This guide has 6 proven strategies to help you get paid faster and enjoy a delightfully positive cash flow in your business.
Author: Dave Birch, smartAR