Small manufacturers hit hard by late payments, report says

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  • Plant & Equipment

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Small and medium Australian manufacturing companies are perpetually owed on average $35,833 each, with outstanding and disputed invoices crippling their ability to grow, according to the Invoice Market’s SME Cash Flow Crisis Report.

Overall there is $2.9 billion worth of outstanding invoices in this sector, the company says, with customer excuses ranging from ‘lost in the system’ and ‘in dispute’ to ‘being reviewed internally’ and ‘being processed offshore’.

The Invoice Market CEO Angus Sedgwick says the findings have important implications for the manufacturing sector, which employs 856,000 people across Australia.

"One of the most striking findings of this report is that while late payments cost companies money, it is the hidden cost in time that is the most revealing," he says.

"On average, 60 per cent of manufacturing companies have to ask twice or three times for their bills to be paid by errant corporate customers."

In eight per cent of cases, companies are forced to demand payment four or more times.

The report shows that 37 per cent of manufacturing small and medium enterprises (SMEs) have no strategy in place to manage their company cash flow, which is cited the Australian Securities and Investment Commission as a factor in 40 per cent of all business failures.

According to the Australian Bureau of Statistics, 52 per cent of manufacturing companies go out of business in the first three years of operation

Sedgwick says that, contrary to popular belief that big businesses and multi-nationals treat small businesses poorly, small businesses were actually the tardiest in paying their bills to other SMEs.

"This means that Australian SMEs are prepared to break their word with suppliers to help their own business," he adds.

"It doesn’t have to be this way. If SMEs can free up their cash flow, it will not only help their own businesses, but it will have profound benefits for national economic growth and job creation."


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