Late payments send businesses to 'breaking point'

Small businesses are struggling to make ends meet, as payment times blow out and cash flows dry up

Small to medium businesses are struggling to make ends meet, as payment times blow out and cash flows dry up.

Debtor finance provider Bibby Financial Services says larger customers are averaging 57 days to settle accounts, which is double the standard terms and enough to slash already tight margins.

"The vast majority of small firms simply cannot afford to wait on money they are owed without a severe impact on their bottom line, particularly if most of their sales are to a few customers," Bibby Chief Executive Greg Charlwood says.

The firm says small businesses must focus on reducing late payments to ensure they are not "stretched to breaking point".

Charlwood says small companies should always conduct credit checks on potential customers and set clear terms and conditions to protect themselves from late or non payments.

"It may be worthwhile considering tightening credit terms for serial late payers," the firm says.

Charlwood has also urged businesses to be as punctual as possible in issuing invoices and concentrating on cash flows to gain an accurate idea of how the business is going.

As well as establishing sound working relationships with customers, Charlwood says small businesses may also be able to secure payment on time with the right attitude.

He says small businesses should politely but firmly seek payment if a customer has not settled the account on time.

"If all else fails, Australian business owners and managers can consider the various means of legal debt recovery for delinquent debts," the firm says.

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