Delayed invoice payment is one of the major issues facing Australian SMEs this new financial year, according to a non-bank business lender.
In a statement, Moneytech said some factors hampering general business activity included uncertainty about economic conditions, supply chain issues, cost of materials, and lack of access to additional funds, which in turn, are slowing invoice payments.
SME operators, who are generally accepting of the already-lengthy 90- and 120-day payment terms, are now spending more time waiting for delayed invoice payments, impacting their cash flow – and at a higher rate than larger operations too.
“These conditions are strangling SMEs,” Moneytech CEO Nick McGrath (pictured above) said. “Our internal research shows SME customers chasing invoice payments to maintain cash flow as their main business concern prior to seeking finance products.”
To ensure business activity is not negatively impacted by slow invoice payment and to improve cash flow this FY2-24, SMEs are encouraged to tighten their own internal processes and seek external assistance.
Debt or equity finance is one financial product which can mitigate SMEs cash-flow issues, with 15% of businesses reporting having sought said solution.
“If a business’ cash is tied up in outstanding invoices, debtor finance helps free up cash by supplying up to 100% of invoices as soon as they are raised, instead of waiting 90 or 120 days, or more, for payment,” McGrath said.
“Debtor finance can be used for better cash flow management, realising the full value of customer invoices, paying salaries, paying suppliers, and investing in growth opportunities. Moneytech’s straightforward, simplified approach to business lending ensures customers can invest in their businesses’ growth and development.”
With many SMEs struggling with poor cash flow and insufficient collateral when accessing finance, a number of them are dipping into personal savings or mortgages to cover business costs.
McGrath shared some top tips on how SMEs can identify and handle potential cash-flow hurdles:
Assess finance
“By outsourcing an independent accountant to do an in-depth analysis of the business’ finance, business owners can gain a fresh perspective of their finances,” McGrath said.
“Using a strategic budget can also help predict the financial implications for the upcoming year and may identify new opportunities for business growth. The budget should include financial forecasts including profit and loss, balance sheet and cash flow statements.”
Reassess strategic plan
McGrath said businesses should review their short-term and long-term goals to help them evaluate the current strategy in place and ensure they are aligned.
“Undertaking a situational and SWOT analysis can be of use, especially if you leverage customer’s feedback as a starting point for developing solutions to meet customer feedback,” he said. “The key is to keep any plan flexible so your business can adapt to any changes in the environment and make the most of potential opportunities.”
Utilise a sustainable cash flow option
“SMEs struggling with cash flow, should consider both immediate and long-term support. Moneytech’s trade and debtor finance solution frees up a business’ cash flow tied up in outstanding invoices to be redirected towards staff wages, equipment or stock,” McGrath said.
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