New data collated by Optipay reveals a sharp increase in the number of days outstanding for invoices issued, particularly to businesses in the manufacturing industry, from 42 to 58 days in the last six months. This situation is putting extra strain on Australian manufacturing on top of the ongoing inflation and global supply issues it is already facing.
“The typical terms of manufacturing businesses is 30 days meaning on average our clients are being paid 28 days after the due date of their invoices, so nearly double what it should be,” OptiPay CEO, Angus Sedgwick, said. “The ramifications of inflation and global supply issues is constrained cashflow and this is having a knock-on effect for all businesses.
“We’re seeing the problem exacerbated by rising interest rates, the ATO ramping collection activity for unpaid tax from the COVID period and access to capital from traditional sources drying up,” Sedgwick added, warning that the next 12 to 18 months are going to be a challenging time for Australian SMEs and that it is critical that businesses have strong business foundations and a cashflow management plan in order to survive.
“There’s no doubt that it is challenging out there for most businesses at this time, so to be able to quickly access the money from sales allows us to better plan our business cashflow and gives us peace of mind,” Mark Crees, General Manager of Finance for Provico, a prominent manufacturer of dairy nutrition which turned to invoice financing in 2020, said. “The ability to receive a large portion of the invoice value up front allows us to fund other areas of the business without having to wait up to 50 days for the customer to pay us.” Provico is on track for expansion after having purchased the former Nestle plant at Dennington in 2020, with plans to produce up to 40,000 tonnes of milk powder each year.
“Any business that invoices another business for goods or services on credit terms is a good candidate for an invoice financing facility,” Sedgwick said. “Businesses can typically access up to 90 per cent of their sales revenue within 24 hours of issuing the invoice. Unlike more traditional business loans there are no ongoing repayments back to the financier as they are repaid when the debtor makes payment of the invoice/s. The fee paid to the financier usually ranges from less than one per cent up to three per cent of the invoice value.
“Cashflow is everything for a manufacturing business and in the current economic times it’s even more important it’s maintained,” he concluded.
