Late payments continue to be a major pressure point for Australian small businesses.

According to the latest data from CreditorWatch, 17 per cent of businesses regard late payments as one of the top risks to their profitability, while 80 per cent of SMEs have experienced late or overdue payments in the past 12 months.

“The cost of business inputs is at an all-time high, business owners are under cash flow pressure, so for many SMEs getting paid on time is no longer the norm, it’s the exception,” said Craig Michie, group executive, client acquisition at ScotPac, Australia’s largest non-bank SME business lender.

“And with Payday Super changes coming into force from 1 July, where superannuation needs to be paid at the same time as wages, there is no doubt that SMEs’ cash flow will be further impacted, placing even greater stress on the business.”

Michie said small and medium-sized businesses have historically tended to rely on overdrafts or standard bank loans to manage cash flow gaps. However, these options can be slow or difficult to secure and often inflexible in meeting business needs.

“SMEs facing a cash flow crunch need more than just funding. What they really need are flexible and responsive financial solutions to mitigate the late payment epidemic,” he said.

Brokers play a critical role

This is where brokers can play a critical role in assisting SMEs in managing their cash flow.

According to the latest ScotPac SME Growth Index, nearly 40 per cent of businesses identify access to finance as their biggest obstacle to success.

Brokers can act as a strategic adviser to help their clients implement a tailored funding solution to meet cash flow challenges.

Michie said brokers can help SMEs unlock faster access to working capital through Invoice Finance and Trade Finance solutions.

Invoice Finance allows a business to access cash tied up in unpaid invoices. Instead of waiting 60 days to get paid, the business can access up to 85 per cent of the invoice value within 24–48 hours.

Michie said this is particularly helpful for businesses experiencing cash flow stress due to longer payment cycle and for growing businesses that have increasing amounts of capital locked up in unpaid invoices.

Brokers can also consider a Supply Chain Finance solution to help bridge the gap between paying suppliers (of imported goods and/or domestic purchases) and getting paid by customers.

According to Michie, rather than implementing these solutions as a last resort, businesses are increasingly using them as a proactive solution to stabilise their operations and support growth.

“Brokers can play a key role here in providing tailored advice early, to help small businesses move from reactive survival to strategic control,” Michie said.

The bottom line

The issue of late payments is not going away – it remains a persistent challenge for many SMEs.

It’s essential therefore for brokers to work with clients to recognise issues early, implement strategies for cash flow management, and identify solutions that can provide stability during uncertain times.

By partnering with the experienced team at ScotPac to leverage flexible financing solutions, such as Invoice Finance and Supply Chain Finance, brokers can help SMEs take back control of their cash flow and focus on what they do best: growing their business.