While late payments to small B2B suppliers appears to be a universal challenge, the U.K. has arguably shed the most light on the problem thanks to industry efforts to raise awareness, and regulatory efforts to lower days payable outstanding.
But analysis from the U.K.'s BACS Payment Scheme Limited suggests late payments are a persistent burden for the small business community.
"For small businesses to be working with large companies and operators is a dream come true," A City Law Firm Founder Karen Holden said in an interview last week with FinTech Futures, which covered the BACS research released last year. "But after paying their overheads and staff costs, it adds a lot of financial pressure that they are only paid on delivery. If you haven't secured a regular monthly cash flow, then you need a strong contingency plan."
Those recommendations could be universally applied, too, considering the latest research on the small businesses late payments burden spreading beyond the U.K., with news from Hong Kong and Australia also shedding light on the issue.
Small business accounting platform Xero published a report last week that calculated the value of late payments made to Hong Kong small businesses, with researchers warning that ongoing trade disputes between the U.S. and China have also exacerbated the problem.
"Unfortunately, dealing with late payments is part and parcel of running a business," said Xero Regional Director for Asia Kevin Fitzgerald in a statement, according to ComputerWorldHK reports. "If the money is tied up in late payments, small businesses struggle to maintain positive cash flow, raise the capital needed for investments and growth their business.
"Small businesses in Hong Kong are already being held back from growing and flourishing in the current trade environment," Fitzgerald continued, "and it is likely to have a knock-on effect very soon, with business owners worrying about paying for basic expenses such as rent."
The news is a bit more optimistic in Australia, where government officials have vowed to accelerate payments to small government contractors — which the government hopes will be a model for the rest of the business community.
"We should be a model debtor," New South Wales (NSW) Small Business Minister Damien Tudehope said, according to recent Sydney Morning Herald reports.
NSW recently launched a new initiative vowing to pay small business government vendors within a week, while another Australian state, Victoria, introduced its Fair Payments Code of Practice with the Business Council of Australia in 2017.
"Our payment practices ensure that we are saving small businesses from the stress of meeting cash flow demands and helping them grow and thrive," said Victorian Small Business Minister Adem Somyurek, per reports.
The nation's Small Business and Family Enterprise Ombudsman Kate Carnell warns that late payments in Australia remain a major challenge to the business community.
"Big businesses [have been] using small businesses as banks — by the way, governments weren't perfect either," she said at a small business conference earlier this month.
PYMNTS breaks down the latest data points from these stories of late payments across the globe below.
50 percent of U.K. SMBs wait 72 days to get paid, according to BACS analysis, which also found that more than one-third of startups and small businesses are struggling with cash flow management. A combined $33 billion is owed to small businesses tied up in accounts receivable, with retail, fashion, food and electronics manufacturers suffering the worst of the late payments problem.
$1.7 billion worth of invoices were paid late to Hong Kong small businesses last year, new Xero research has found. More than half — 56 percent — of payments were made on time, yet by the time 2018 closed out, nearly 14 percent of invoices issued by Hong Kong-based small businesses were left unpaid, totaling nearly $1 billion. While Hong Kong regulators have increased credit limits for small businesses by 20 percent to combat the immediate effects of the U.S.-China trade war, geopolitical disputes have further heightened uncertainty for small to medium-sized businesses (SMBs) in Hong Kong.
Five days is the length of time the Australian government will take to pay electronic invoices submitted from small businesses. The government also pledges to pay non-electronic invoices issued by SMBs within 20 days for bills below $20 million, reports said. At the state-level, NSW has similarly vowed to pay invoices of $1 million or less within 20 business days (more than 90 percent of small business government contracts are below $10,000), while the state plans to accelerate those payment terms to five days by the end of 2019. In Victoria, a voluntary code commits businesses to pay within 30 days.