GoCardless outlines the extent to which the cost of living crisis has affected the cash flow security of small and medium-sized businesses (SMBs) in Australia in its latest "Pursuing Payments" study.

According to a fintech poll of 515 Australian SMB owners and key decision-makers in the private sector, 55% of business executives are concerned that the proportion of late-paying clients would rise over the course of the next 12 months.

The gravity of the problem is demonstrated by the fact that half of respondents avoid difficult financial conversations with their clients. Conversely, 86% of those who have refrained from discussing money with clients during the last 12 months claim that doing so has had some effect. Indeed, 19% of respondents believe that their company loses between $6,000 and $30,000 a year as a result of late payments.

According to the data, there is a difference in payment confidence between genders. While 29% of women believe that they would feel awkward approaching clients for payment, 46% of women say that they would feel uncomfortable pursuing unpaid bills. Only 26% of males, on the other hand, find it awkward to request money, and 40% of them have also had to pursue payments.
 

There seems to be a generational divide in this area as well. Compared to Baby Boomers, millennials are more than twice as likely to agree that it would be awkward to approach customers for payment (42% vs. 20%).

What options are available to SMEs?
 

GoCardless general manager Luke Fossett talked about how Australian firms should respond, saying that "businesses need to acknowledge this and adapt quickly to stay on top." Fossett predicted that in 2024, "despite some optimism emerging late payments will continue to cause a cashflow crunch for already struggling SMBs."

"There are workable ways to prevent more awkward financial talks, like steering clear of payment options with high failure rates, following up on delinquent invoices automatically, and providing less burdensome payment options like Direct Debit or PayTo, which take money straight out of the customer's bank account.


"All they have to do is set up the payment once and then forget about it for recurring payments.”

The variables that made businesses more likely than last year to have a conversation regarding late payments were also identified by GoCardless' survey:

Businesses' increasing operating expenses make payments more essential (55%).
Finding that 44% of the customers weren't turned off by the conversation
being irritated at not getting paid what they were due (34%).
 

GoCardless user and owner of Dukes Gym in Melbourne, Jonathan Quieros, expressed astonishment that 62% of Australian Millennials find it awkward to follow up on unpaid bills. "I believe that comes with practice. It's not impolite if you're being explicit and open about what you're doing. It would be absurd to visit a restaurant, enjoy the meal, and then be shocked to learn that you need to pay for it.

"I believe that's because our fees are clear, upfront, understandable, and transparent right from the beginning. We make an effort to eliminate any room for misunderstandings or assumptions.