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Small- to medium-sized enterprises (SMEs) across Australia are grappling with mounting challenges as payment delays continue to rise, creating significant pressure on cash flow and business sustainability.
With economic conditions tightening, businesses across most sectors are facing longer payment terms, making it increasingly difficult to manage working capital effectively.
New insights from Moneytech, alongside data from CreditorWatch’s trade receivables analysis, have revealed a concerning trend in overdue payments.
Recent data from CreditorWatch’s Business Risk Index highlighted the financial difficulties Australian businesses are facing as they approach 2025.
Late payments have reached their highest rate since March 2021, with overdue business-to-business (B2B) payments continuing to rise, particularly in sectors such as construction and hospitality.
With B2B payment defaults – one of the strongest indicators of insolvency – more than doubling in the past 12 months, the increase in late payments is placing severe pressure on SMEs’ cash flow, making it more challenging for them to meet financial obligations and maintain operations.
Insolvencies have surged by 57 per cent over the past year, reaching record highs, while the average business failure rate across all sectors now stands at 5.1 per cent, with projections expected to rise to 5.6 per cent in the coming year.
Legal actions against businesses also remain elevated, partly due to heightened debt recovery efforts by the Australian Taxation Office (ATO), adding further strain to SMEs already struggling with delayed payments and limited cash flow.
Industries such as construction, manufacturing, transport, and wholesale trade are among the hardest hit by late payments.
“Late payments put significant strain on small businesses, especially those operating in sectors where cash flow is already tight,” said Moneytech CEO Nick McGrath.
“With many SMEs also carrying outstanding ATO debt, the pressure on cash flow is even greater, making it critical for businesses to receive payments on time to meet their financial obligations.”
Payment delays in sectors like manufacturing and transport create knock-on effects throughout the supply chain. Manufacturers waiting on payments from large retailers and wholesalers face growing cash flow gaps, delaying their ability to pay suppliers and staff.
SMEs supplying to these industries frequently face some of the longest payment terms, ranging from 30 to 90 days or more.
“For SMEs, these delays mean making difficult decisions about their own financial commitments, which can stifle growth and innovation,” McGrath said.
Larger businesses are increasingly extending payment terms, leaving smaller suppliers in financially vulnerable positions.
While the Australian government has introduced mandated payment terms for large businesses and government entities to support SMEs, such as the Payment Times Reporting Scheme (PTRS) and supplier payment policies requiring payments within 20–30 days, compliance with these initiatives remains inconsistent, further exacerbating the strain on smaller enterprises.
For investors and business leaders, understanding these payment trends is becoming more important than ever.
“By recognising these patterns, businesses can take proactive measures to mitigate risk and ensure financial stability,” McGrath said.
“As economic uncertainty continues, it’s more important than ever for SMEs to take proactive steps to manage working capital while advocating for fairer payment practices.
“The data highlights the need for improved payment discipline across industries, ensuring SMEs are paid on time to support sustainable business growth.”
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