The federal government has made a clear pledge to start paying e-invoices from SME suppliers within 5 days of receipt. Some state governments (but very few at this stage) are following suit, others are being urged to or have their own prompt payment policies.
These plans will be welcomed by small business. They show that the public sector is finally waking up to the problems late payment causes to smaller businesses. Unfortunately, most large corporates look set to shake off any pressure to join this very reasonable initiative.
For SMEs who primarily sell to big business, other SMEs, or government entities that haven’t yet adopted prompt payment terms, the difficulties caused by late payments continue. Fortunately, with debtor finance they could get their money even quicker than those lucky federal government suppliers.
Big Companies Deliberately Pay Late
Occasional difficulties getting money from a customer are one thing – and this situation can be distressing for SME owners. This has always been a risk of business, however.
What is really frustrating for small business owners is the deliberate late payment practices of many larger companies: depending on the industry they are in, SME can expect their invoices to be paid within 30, 60, or even 90 days of issue.
Sometimes corporates use tactics such as complicated invoice approval processes to keep cash in their own accounts for longer. Mostly, though, they just impose terms on suppliers and get away with it because of their power in the market.
How Late Payment Hurts SMEs
While large companies shore up their cash position by hanging on to money they owe, the damage inflicted by these late payments is significant. Small and Medium businesses are being starved of the funds they would otherwise use to grow; to pay workers; to pursue bigger orders and bring in their own raw materials from overseas to sell the finished product.
Many, if not most SMEs, end up paying for overdrafts and other expensive long term business funding just in order to secure their own cash position and guarantee they can pay the bills. This harms growth prospects in general, because it is hard won business funding that isn’t being used for investment.
If only those SMEs could get paid as fast as their counterparts selling to the government.
Get Paid Even Faster With Invoice Finance
In fact, SMEs with reliable business customers can get their money faster – even if their invoices usually take 45-90 days to get paid.
By using invoice finance – often called debtor finance or cash flow finance – SMEs can access up to 90% of the money tied up for months in their accounts receivables ledger within 24/48 hours. They can use it to pay their bills and wages, and there is often enough left over to invest in growth.
Debtor finance can easily be arranged and put in place in a matter of days, from the likes of OptiPay. Once you are approved, you could start getting most of the money tied up in any invoice you issue, within 48 hours of approval. That’s more than twice as fast as even the Australian Government pledged to pay!
Find out how invoice or debtor finance could work for you: call OptiPay now, and get tomorrow’s cash flow today.