Mitigating the significant and long-term risk of delayed payments

The issue is a structural one, with more than two-thirds of respondents indicating that up to 30 per cent of issued invoices were paid late. 

And this trend seemingly does not discriminate. Sole traders experienced an average 14-day delay, while SMEs reported delays between 15 and 29 days.  Scale also did not protect businesses, with 94 per cent of businesses with over 200 staff affected by this epidemic, proving it is not only widespread but a recognisable pattern of delay, with compounding effects.

Economic stability continued to be fragile, with 56 per cent of businesses reporting challenges in accessing finance, due to high interest rates, complex applications and collateral requirements. In turn, 60 per cent of respondents have turned to self-funding to stay afloat.

According to Patrick Coghlan, chief executive of CreditorWatch, “many businesses are operating with very little buffer.”

He continued: “Even when they’re technically profitable, late payments are stretching cash flow to the point where owners are delaying decisions, dipping into personal savings and taking on risk they shouldn’t have to carry.”

Individual wellbeing was also jeopardised when payments were unpredictable. Forty-three per cent of respondents reported personal stress as a major consequence of late payments, more than a quarter reported falling behind on loans, rent or utility bills, and 24 per cent reported increased debt or delayed payment of wages as a direct consequence.

The business impacts are also severe: more than 20 per cent reported weakened ability to deliver on contractual or service obligations.

"When payment delays become normalised, the pressure doesn’t disappear; it’s pushed down the supply chain. That has real consequences for confidence, growth and the willingness of businesses to invest, hire or take on new work," Coghlan said.

Chasing payments also presents its own issues. Nearly three-quarters of businesses expressed concern about customer relationship management, 28 per cent expressed concern that clients would reduce or cease doing business with them, 25 per cent did not want to upset customers, and 19 per cent found the conversation difficult. 

In response, other methods were referenced as potential solutions. Eighty-eight per cent of businesses retained at least one strategy to reduce the likelihood or impact of delayed payments, such as avoiding customers with a history of overdue invoices, requiring partial payment upfront, shortening payment terms or imposing penalties.

Due to the persistent and costly nature of delayed payments, taking these steps and making efforts to put all possible variables in one’s own hands may be the key to improved business confidence and easier management.

"Improving payment practices would help unlock working capital already earned by businesses, reduce stress on owners and operators, and support healthier growth across the economy," Coghlan said.