4th February, 2019
Australia’s track record on getting businesses paid on time is increasing insolvency risk, which then compounds the problem. It’s time we break the cycle.
Overdue payments from both customers and buyers are on the up according to the latest NCI Trade Credit Risk Index.
At the same time, the value of trade credit insurance claims paid grew by 19 percent to $64 million in 2019.
The data highlights Australia’s growing issue with insolvency risk, which has implications for all businesses regardless of their individual risk of insolvency.
When companies collapse, the flow-on effects mean their suppliers and customers are often left disadvantaged and potentially out of pocket.
To put it another way: your client’s growing risk of insolvency today translates to an increase in your risk tomorrow.
One way to begin solving this issue is to reduce the lag time it takes for businesses to get paid.
Solving cash flow crises is a sure-fire way to improve conditions for many Australian businesses – cash flow being a common pain point for many owners and managers.
This is because Australian companies are the slowest at paying outstanding invoices — worse than Mexico, South Africa and the United Arab Emirates — according to a recent report.
The average amount of time it takes for an invoice to be paid in Australia is 26.4 days overdue.
Good news is, we’ve already begun closing this gap.
With illion’s Late Payments analysis, Australian businesses are setting records for paying overdue bills faster, showing a new low of 10.4 days at the end of September 2018.
No matter how you slice it, this is the time for businesses to review their risk position as it relates to payments, and look for every opportunity to reduce the time it takes to get paid.
If you’re a business owner or manager and you know payment times are a potential issue for your business, here four simple things you can do to get started:
Offer customers smarter, flexible payment and invoicing solutions. At the very least, you should be able to accept customers’ preferred ways of payment.
READ: Why offering more payment options means accessing more customers
Just when you thought you were getting a handle on physical cards, along come virtual cards. As you’d probably guess, virtual credit cards aren’t physical credit cards at all. Instead, they’re a randomly generated 16-digit number designed to protect traditional business credit card information when paying suppliers online.
Another simple yet efficient way to improve your cash flow is to offer your customers the option of recurring payments. According to the Reserve Bank of Australia, Australians pay about 16 percent of their bills on a recurring basis.
Whether it’s a subscription-based service like memberships or instalments for other products or services, with recurring payments, you’ll be able to receive money from your customers securely and on time.
Sick of the three-day waiting periods on getting payments or having to give your BSB and account number to your customers? This is about to change with the New Payments Platform (NPP). NPP will allow customers to send and receive payments in real-time using mobile numbers, email addresses or ABNs.
To accept NPP payments, you’ll need to work with your bank to check whether you’re eligible to be connected to the new platform.
READ: What you need to know about the New Payments Platform
Paying suppliers and staff is an often-arduous process that takes up a lot of time and energy for many businesses.
Suppliers and staff can now be paid on the same day that payment is processed directly from certain online accounting software packages, including MYOB products as an example.
READ: Paying staff and suppliers just became easier with MYOB
If you’re struggling with cash flow and don’t have the correct tools to help shorten your payment lag time, now’s the time to consider how to acquire them.
MYOB PayBy is a full-featured payment gateway that offers merchants the ability to accept payment by VISA, Mastercard, BPAY and AMEX with many more coming soon. It also works with Rerun. Rerun is for any business that wants to automate their recurring subscriptions or membership billing and accept payments via credit card.
For more information on MYOB PayBy, visit myobpayby.com.