One in five Australian SMEs are losing between $6,000 and $30,000 from late payments annually, says GoCardless.
The bank payments company surveyed more than 500 Australian small and medium-sized business owners and primary decision-makers in the private sector to complete its new ‘Pursuing Payments’ report.
The results reveal that 55 percent of business leaders are worried that the number of late-paying customers will increase in the next 12 months, which is a major concern considering that 50 percent of respondents admit that they avoid awkward money conversations with their customers.
When asked why, the highest proportion (29 percent) say they are afraid of coming across as rude, while 27 percent indicate they don’t want to risk upsetting their customer.
Of those who avoided these conversations over the past 12 months, 86 percent said it has caused an impact.
The report found that millennials are more than twice as likely as baby boomers to agree that they would feel uncomfortable asking customers for payment (42 percent compared to 20 percent).
Meanwhile, when it comes to chasing up late payments, three in five (62 percent) of millennial business leaders say that they would feel uncomfortable, compared to 40 percent of Gen Xers and 36 percent of baby boomers.
So much so, 50 percent of millennials are willing to ‘let slide’ up to 10 percent of their annual turnover in order to avoid an awkward conversation about late payments, compared to only 36 percent of Gen Xers and 34 percent of baby boomers.
The cost of living crisis has also hit this generation hard, with half admitting that they now find it even more difficult to talk about money with customers, while 70 percent are concerned that late payments will increase this year as the cost of living rises.
The findings also reveal a gender gap when it comes to payment confidence, with 29 percent of women agreeing that they would feel uncomfortable asking customers for payment, compared to 26 percent of men.
This rises to almost half (46 percent) of women who feel awkward when it comes to chasing late payments, as opposed to 40 percent of men.
The most negative impacts from avoiding money conversations include:
- increased stress for business leaders personally (43 percent)
- increased stress at work (37 percent)
- their business being paid late (36 percent)
- financial losses for their business (31 percent)
Inversely, the top reasons cited by businesses for being more likely now to have a conversation about late payments with customers compared to last year include:
- operating costs for businesses rising making payments more urgent (55 percent)
- the realisation customers weren’t put off by the conversation (44 percent)
- being fed up with not receiving what they were owed (34 percent)
Luke Fossett, general manager at GoCardless said emerging late payments will continue to cause a cash flow crunch for already struggling SMEs in 2024, with businesses needing to acknowledge this and adapt quickly to stay on top.
“For those wishing to avoid more uncomfortable money conversations, there are practical solutions, such as avoiding payment options with high failure rates, automating follow-ups on unpaid invoices and offering payment methods that reduce the onus on your customers such as Direct Debit or PayTo, which automatically pull money from a customer’s bank account. For recurring payments, all they need to do is set up the payment once and then forget about it,” he says.
Millennials and Gen Xers (85 percent and 68 percent, respectively) are more likely than baby boomers (51 percent) to take up this advice and show interest in introducing technology – such as automated invoicing, PayTo or payment platforms to get paid more quickly.
Download the report here.
