SMEs Feeling the Pinch as Invoice Payment Times Blow Out

Non-banker lender OptiPay said the credit squeeze is starting to bite with inquiry levels leaping up to 40 per cent and invoice payment times blowing out beyond a month.

OptiPay chief executive Angus Sedgwick said his SME clients were increasingly struggling with cash flow in the wake of COVID as debtors took longer to pay and access to finance got tighter.

“What we’ve seen over the last six months is the average number of days that an invoice is open before a debtor pays it is slowly creeping out,” he said.

“Buyers are becoming more selective as to which creditors they’re paying because they’ve got limited cash.

“As a result, the days outstanding is getting longer. From an average of 31 at the beginning of this year, it’s now crept out to 38 days on average. If it starts to get out to 40-45 days, that indicates the economy is heading towards a recession.”

For OptiPay clients the average outstanding amount per debtor ranged from $35,000 to $40,000, and some suppliers might have half-a-dozen debtors with that level outstanding.

“If payroll runs on Wednesday and you’re expecting to get paid on the Friday but you didn’t get that money and the debtor says I’ll pay you next Friday, well that doesn’t help – you’ve got no cash,” he said.

The problem was across the whole economy but the construction industry and importers/distributors were on the frontline.

He said liquidity in the economy had tightened up significantly in the last six months with the resumption of ATO debt collection, the end of pandemic support schemes, rising inflation and supply chain issues.

“Banks have gone back to pre-COVID credit underwriting processes now that the government guarantee has ceased. Access to capital is becoming a lot tighter across the whole economy,” he said.

“Companies, whilst they might have lots of orders to buy stuff from their buyers, if they can’t get that product from overseas into Australia to sell, that’s a problem.”

He said OptiPay had more than 100 clients around Australia with annual turnover between $2 million through to $20 million. Most had outstanding tax debts ranging from $100,000 to $500,000 and applications for funding had jumped, he said.

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Who is OptiPay?

OptiPay, one of Australia’s leading business finance providers, has been dedicated to helping small business owners solve cash flow challenges  for over a decade and has provided $1.5 billion in business funding to more than 500 Australian businesses. OptiPay specialises in modern financing solutions such as invoice factoringinvoice financedebtor finance, and lines of credit. OptiPay’s mission is to support business growth providing liquidity in as little as 24 hours, ensuring they have access to tomorrow’s cash flow today. This rapid access to funds helps businesses maintain smooth operations and seize growth opportunities without the stress of cash flow constraints. At OptiPay, we believe that healthy cash flow is the lifeblood of any successful business. Our commitment to helping businesses overcome financial hurdles and achieve their growth ambitions has solidified our reputation as a trusted partner in the business finance sector. Whether you are looking to stabilise your cash flow, expand your operations, or navigate financial challenges, OptiPay is here to support your journey with innovative and efficient financing solutions.

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