Small and medium businesses are losing access to as much as $7 billion a year because bigger companies are not paying their bills on time, according to a new study.

 

A survey by small business software firm Xero found that half of all trade credit invoices are paid late and  that solving the problem would see small and medium businesses (SMBs) benefit by $4.38  billion over 10 years.  

 

The report, “Paying the Price: the economic impact of big businesses paying Australian small  businesses late”, is based on data from Xero Small Business and analyses more than 10 million invoices issued by more than 150,000  SMBs.   

 

 “Late payments are the scourge of small business, and being able to name the staggering figure of $115 billion for the first time gives fresh urgency to solving the problem. We call on big business and government to prioritise this issue. Our research finds that addressing the fundamental inequality of small business carrying $115 billion worth of debt on behalf of big business will deliver a significant benefit of $4.38 billion to

SMBs over a decade ,” Trent  Innes, Xero managing director, Australia and Asia, said.   

 

The report finds that over half of all trade credit invoices to SMBs (53 per cent) are paid late, being settled an average 23 days after they are due. With small business issuing $216 billion in invoices each year, this equates to $115 billion in late payments. 

 

Having identified the impact of late payments, the report also finds for the first time a direct link between payment time length and slower growth for small business. The study finds that SMBs which are paid more slowly than average have about a third lower revenue growth than those paid more quickly.

 

Long payment times also have a domino effect across the economy, as SMBs that are paid slower than average pay their own suppliers eight days later than those  paid faster than average.   

 

 “We can no longer accept it as the status quo that Australian small business carries billions of dollars of debt for big business. The $115 billion of late payments identified in the report equates to around $52,000 owed to each small business in Australia,” Innes said.