A few months ago, you might have seen one of the biggest small business problems make the news and then some – the issue of getting paid in a timely fashion.

Over the years, you’ll have seen us write a number of times on our blog and in our newsletters, about ‘cash is king’ and that cash flow is the life-blood of any business. But, given how much more difficult it is for small business owners to obtain access to business funding, the truth is, cash flow is just that much more critical to small business than it is anywhere else.

Of course, small businesses have known that this is a problem, since forever. So why all the attention now?

Australia’s payments report card isn’t great.

Some international research done by Market Invoice (a UK co) looked at payment times on 300,000 invoices across 80 countries. And Australia was at the bottom of the list. It wasn’t pretty. By comparison, Australian small businesses’ pay delay is almost twice as long as South Africa (16.5 days late) and Mexico (18.6 days late). In fact, Aussie invoices get paid almost 30 days late.

That’s not at 30 days. That’s 30 days LATE. Which if you’ve got 30 day terms means you’re being paid around the 60 day mark. And if you’ve got 7 day terms, it’s taking 5 times as long as you’d like to be paid.  All in all, you’ve effectively become a, usually interest-free, bank to your clients.

Plus then you’ve got to chase the unpaid invoices – which given Aussie small businesses are spending around 12 days a year doing that – is a massive drain on productivity. Just think how much you could get done with an extra 12 working days a year (or you might just be able to take a real holiday!).

Of course, whilst you’re waiting for your clients to pay you, you still have to pay staff, suppliers, rent, rates, etc. And that usually means taking out a loan, or using credit cards – both of which attract and require payment of interest. And that in turn eats into your profit.

Who’s the worst at paying their bills? Well, if you run a business, no surprises, it’s big businesses and the government at all levels that are amongst the slowest to pay some with terms stretching to 90+ days.

So how do you get clients to pay? Well, the contractual terms are being looked at by the government’s Small Business Ombudsman’s office in 2017, which will possibly sit alongside the fair contract revisions we’ve seen recently.

But what if you can’t wait that long?

Xero have recently introduced automatic payment reminders for your invoices. You can set them to run at whatever intervals you like. A couple of days after the invoice hasn’t been paid. Again at a week, 10 days, a month, etc. Whatever works and gets you paid.

We know that many businesses will pay the squeaky wheel. So it pays to send those reminders

It can also help to ring and speak with the person that writes the cheques/does the payment runs. Always be nice. You never know what they’re dealing with and they could be waiting, just like you, for payment from someone else before they can pay others. By being nice, you might just find they go out of their way to get you paid or you get paid as first cab off the rank.

You might also consider having a solicitor look at your terms of trade and write an interest clause into it for late payment. After all the bigger business’ would pay interest for using the bank’s money – and so it should be with yours.

Unfortunately, if you’re still running your books on excel or paper – you’re behind the eight-ball in terms of having a tight rein on what’s owing. You might want to consider upgrading to a cloud application like Xero. The dashboard gives you an instant idea of which customer invoices are still outstanding, what’s owing and how long it’s taking to get paid – plus BAS then becomes a much easier task.

If that sounds like a great way to better stay on top of your revenue for 2017, we can help with that. Of course, if you’d like to discuss your financials, budgeting, forecasting, etc., we’d be more than happy to help with that too. You can call us on 6023 1700 or drop us a note via the form below.

Got a question? Get in touch

If you've got financial or business questions, or you just want to run something by us, we'd be delighted to really talk to you – in person, over the phone - call us on 02 6023 1700 - or you can use the form below and we'll get back to you.

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