The number of SMEs struggling due to late payments is still being felt, according to new research.
A recent study by Skynova aimed to determine how many SMEs are suffering from unpaid client invoices, the impact it has on their business, how long they wait before cutting ties with clients and the most effective methods to ensure invoices are paid on time.
According to the research, 45 per cent of small businesses surveyed are suffering from open past-due invoices. On average, each business has 15 late invoices from clients.
The research also found that 49 per cent of small businesses report a client completely stiffing them or refusing to pay for services. On average, the unpaid amount for a client refusing to pay is $3,000, the research said.
Further, the research found that over the past year, 15 per cent of small businesses have passed down the costs of these late payments onto their employees through decreased salaries, reduced benefits and layoffs.
Fifty-two per cent of businesses have had to cut ties with clients due to past-due or unpaid invoices, waiting less than five weeks before cutting ties with clients.
Meanwhile, nearly 20 per cent of small businesses indicated that they are having to put additional expenses on business credit cards due to unpaid and overdue invoices.
“Ultimately, the survey reveals business owners have power – and they can use this to get their clients to pay them. After all, clients come to small businesses because they need a product or service. While businesses do need clients to make money, they need to exercise selectivity to avoid these invoice nightmares,” the research notes explained.
“Before entering into an agreement with a client, conduct your due diligence. Do they have notable reviews online? Are they a newer company? Where do they fit into your current set of clients? If they pay late, can your business survive?
“While the idea of a new client sounds exciting, there are substantial risks you need to consider. Given that five in 10 business owners deal with late invoices, do what you can to avoid these situations – otherwise, it may end up hurting you.”
31 December 2021