An international study made on 30,000 invoices from 80 countries revealed that Australia is falling behind the rest of the world in terms of late payments. Late payments are best described as the silent killers of small businesses. According to Small Business and Family Enterprise Ombudsman, delaying payments is unfair business behavior. Big businesses and governments must be penalized for delaying payment of invoices of small business suppliers.
Small business ombudsman Kate Carnell wants to make sure that Australia has the shortest payment times instead of the longest. A research made by UK-based Market Invoice found out that small businesses in Australia are paid 26.4 days late; this is far later than Mexico at 18.6 days and South America at 16.5 days late. It is a drag on productivity if small businesses fall victim to unfair payment practices of some big businesses. Big businesses must always honor the stipulated payment terms so that the small businesses will not be required to seek interest-free loans on the basis of late-paid or unpaid invoices.
According to statistics compiled by the office of the ombudsman, at least 90% of the reasons for business failure are poor cash flow. Unpaid invoices are over $26 million with the average owed for each small business at one time at $13,200. Most of the owners of small businesses spend an average of 12 days per year running after the payments for unpaid invoices with 27% required to take out loans to pay wages of staff and suppliers.
Chasing overdue payments can be distressing for a small business not to mention that it is waste of time. In some cases, the small business has to focus on surviving instead of thriving. If the small and medium-sized businesses in Australia fail because of the practice of long payment terms, it will have a negative impact on the economy.
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