Late payments and lack of payment tools threaten Australian SMEs
August 26 2022
We recently studied 250 Australian SMEs and the results show that the average business spends over a day every month processing invoices — which doesn’t include the time spent chasing late payers.
Our data also revealed that while the average payment terms set out by businesses was 30 days, the average time to receive payment was 37 days.
Anything over 30 days can be detrimental to a small business’s cashflow when they have their own financial concerns such as paying employees, suppliers and utilities. Chasing payments is not only costly in terms of resources but can damage relationships — something that’s increasingly important when it comes to smaller organisations.
Another surprising finding was the number of businesses still sending invoices manually — using spreadsheets and email (or in the case of 12% of these businesses — by post or by hand!).
For the 68% of businesses who said they send invoices by email or post, bzTrack can save them hours. Once you’ve added a list of customers, you can just quickly upload and send an invoice from your phone or pc.
By having all your payments in one place, a business can get a quick snapshot of what funds are coming in each month and schedule payments accordingly.
Even if a business has an accountant to do their invoicing, by using bzTrack, an organisation can keep an eye on their finances on the go.
When paying a bill through bzTrack, the system uses the invoice details to create the payment to a supplier so you don’t have to leave the site nor enter the same information again in your internet banking.
Another frustration that the survey revealed was paying from multiple sources. Currently on the bzTrack platform you can pay by bank transfer or card payment and payment by wallets, bPay and PayPal will all become available in due course.
Discounts for early payment
We also asked if businesses offered any incentives to pay early and the resounding answer was ‘no’. However, when asked if they would offer a discount if it were easy to set up using a template, over half of the respondents said yes.
Invoice Discounting templates are something that’s available through bzTrack and are very simple to set up. By offering your customers a discount (whether it’s 5% or 10%) if they pay you within a short amount of time, they benefit from a cheaper invoice and you get hold of your cash quickly — a win -win for both parties! By offering discounts like these, businesses can avoid costly invoice factoring or accessing short-term finance which may put them into debt.
Late payments and knowing your customers
Companies paying late has been the main complaint affecting cashflow for years and it wasn’t surprising to see the results from this latest survey (36% mentioned late payment as a pain-point). Some comments however, such as ‘I’ve never found a useful tool [for chasing payments]’, We use debt collection agencies” or “It’s just the nature of business to be paid late” highlight the frustrations felt by small businesses that not only cause headaches but can threaten their future.
Aside from issuing late fees and collection agencies, it’s often better to be armed with knowledge of a business’s finance before you start trading with them. That’s why bzTrack offers credit checking reports via CreditorWatch, so a business can understand the financial health of their customers and be aware of any risk they might encounter once they start doing business with them.
Any bills that are overdue are flagged up and sending a reminder to pay can be done with one click rather than having to email individual late payers every month. The platform will soon have automated reminders so you can ensure any habitual late payers will be getting timely reminders several days before an invoice is due and the day before to try and prevent those businesses paying you late.
The future of e-invoicing
A recent study by Xero showed that over 50% of Australian small businesses would take up e-invoicing if they started to receive e-invoices from telecommunications companies, office suppliers and large state bodies such as ASIC. And a study in late 2021 by Deloitte showed that e-invoicing could deliver savings of up to $20 per invoice meaning that Australia’s SMEs could save up to $40,320 a year. (https://news.sap.com/australia/2021/10/20/sap-study-finds-e-invoicing-could-save-aussie-smbs-over-40000-a-year/)
Australian Small Business and Family Enterprise Ombudsman Bruce Billson said of e-invoicing. “It is a great way to enable faster payment, it cuts the administrative burden and is more secure than posted or emailed invoices so it reduces the chance of invoice fraud or scams,”
“About 1.2 billion invoices are exchanged in Australia every year but 20 per cent are sent to the wrong person and 30 per cent have incorrect information. It costs around $30 to process a paper invoice while an e-invoice costs less than $10.”
Sending invoices on bzTrack is completely free — the service is a pay-as-you-go model with the customer taking care of the fee when they pay through the platform. Credit checks are available for either $9.95 or $49.95 for a detailed report.
Head to www.bztrack.com to create a free account and take control of your cashflow.