Non-bank business lender Moneytech has identified delayed invoice payments as one of the biggest issues facing Australian SMEs this new financial year.
This is in line with data from the Australian Bureau of Statistics which listed uncertainty about economic conditions, supply chain issues, cost of materials, and lack of access to additional funds as some of the factors hampering general business activity among businesses.
It is also reported that delayed payments are impacting cashflow for small businesses at a higher rate than larger businesses. SMEs who are generally accepting of already lengthy 90 and 120-day payment terms are now waiting even longer if invoice payments are delayed.
“These conditions are strangling SMEs,” Moneytech CEO, Nick McGrath, said. “Our internal research shows SME customers chasing invoice payments to maintain cashflow as their main business concern prior to seeking finance products.”
MoneyTech suggests that in order to combat slow invoice payment and improve cashflow, SMEs can tighten their own internal processes and also seek external assistance to ensure their business activity is not negatively impacted in FY23-24. 15 per cent of businesses have reportedly sought debt or equity finance and debtor finance to alleviate SME cashflow issues.
“If a business’s cash is tied up in outstanding invoices, debtor finance helps free up cash by supplying up to 100 per cent of invoices as soon as they are raised, instead of waiting 90 or 120 days, or more, for payment,” McGrath said. “Debtor finance can be used for better cashflow management, realising the full value of customer invoices, paying salaries, paying suppliers, and investing in growth opportunities.”
For businesses facing slow invoice payments, McGrath shared some tips for businesses owners to consider for effective planning around the new financial year and identifying any potential cashflow hurdles.
Assess finance – “By outsourcing an independent accountant to do an in-depth analysis of the business’ finance, business owners can gain a fresh perspective of their finances. Using a strategic budget can also help predict the financial implications for the upcoming year and may identify new opportunities for business growth. The budget should include financial forecasts including profit and loss, balance sheet and cashflow statements.”
Reassess strategic plan – “Reviewing the business’ short-term and long-term goals can help evaluate the current strategy in place and ensure they are aligned. Undertaking a situational and SWOT analysis can be of use, especially if you leverage customer’s feedback as a starting point for developing solutions to meet customer feedback. The key is to keep any plan flexible so your business can adapt to any changes in the environment and make the most of potential opportunities.”
Utilise a sustainable cashflow option – “SMEs struggling with cashflow, should consider both immediate and long-term support.”
