Aussie SMEs Stuck In $20B Late-Payment Debt

Australian SMEs are stuck in more than $20 billion in unpaid bills from their large corporate customers, according to the latest analysis from Xero.

The small business accounting company said Monday (March 27) that it estimates SMEs in the country are owed more than $20 billion, with these debts putting companies’ ability to pay staff and suppliers in jeopardy.

According to a survey, 86 percent of SMEs said the federal government should do more to combat the problem of late B2B payments. Further, 79 percent specifically supported a government-backed policy that would reduce the time it takes large corporates to pay their small suppliers. Most also told Xero that they would like to see the government promote faster and fairer B2B payments by focusing on contracts. But Xero said the government should tread carefully when taking action on this issue.

“In our experience, increased regulation and red tape do as much harm as good, particularly when the increased burden on small businesses is taken into account,” said Xero Australia managing director Trent Innes in a statement. “Rather, we’re looking to the government to bring about non-legislative measures that foster and encourage big businesses to do the right thing and pay fairly.”

Australia hasn’t entirely ignored the problem. In 2015 the Department of Treasury and Finance named and shamed the worst offenders for late supplier payments, and last year the nation’s Small Business and Family Enterprise Ombudsman, Kate Carnell, spoke out against large corporates that delay payments to suppliers.

But as SMEs await action from the federal government, Xero’s report found small business owners are facing immediate threats.

Nearly half of SMEs said late payments hinders their ability to grow, and more than a third said late payments are the reason why they could not purchase more equipment. Hiring practices were also impacted, as were the ability for SMEs to pay employees — and themselves.

“Our study found that six in 10 small businesses would not survive more than three months if all invoices went unpaid,” Innes added. “Some 6 percent of businesses wouldn’t even last a week.”