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Cash flow and business sustainability for small businesses are under substantial pressure as payment delays persist, reaching their highest rate since 2021.
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Cash flow, late payment struggles set to persist for SMEs, says Moneytech
27 February 2025
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8 minute read
Late payments have reached their highest rate since March 2021 as overdue business-to-business (B2B) payments continue to rise, adding to the challenges faced by SMEs.
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Data from Moneytech and CreditorWatch revealed Australian SMEs would likely face growing challenges as payment delays continued to rise, putting pressure on cash flow and business sustainability.
Moneytech and CreditorWatch noted a “concerning trend” in overdue payments, resulting in many businesses across most industries having experienced longer payment terms which made it difficult to manage working capital effectively in the tough economic conditions.
B2B payment defaults were outlined to be a main contributor to insolvency, and with payment defaults on the rise it was likely SMEs would feel significant pressure on their cash flow and struggle to meet financial commitments and sustain operations, CreditorWatch said.
Nick McGrath, chief executive of Moneytech, said industries such as construction, manufacturing, transport and wholesale trade were among the worst affected by late payments.
“Late payments put significant strain on small businesses, especially those operating in sectors where cash flow is already tight,” he said.
“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.”
The research found that payment delays in sectors such as manufacturing and transport created a “knock-on” effect throughout the supply chain. Manufacturers waiting on payments from large retailers and wholesalers faced growing cash flow gaps, delaying their ability to pay suppliers and staff.
This was mirrored in the transport sector, as long payment cycles often meant operators would cover the costs of fuel, maintenance and wages well before receiving payment from customers.
Construction and retail sectors had experienced similar issues, adding to the mass of financial stress and growing concern, McGrath said.
Payment terms for SMEs supplying to these industries had been observed to have lasted between 30 to 90 days, he added.
“For SMEs, these delays mean making difficult decisions about their own financial commitments, which can stifle growth and innovation. Larger businesses, in particular, 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 and supplier payment policies requiring payments within 20 to 30 days, compliance remains inconsistent, which adds further strain on small enterprises.”
McGrath said investors and business leaders needed to understand these payment trends so they could take proactive measures to mitigate risk and ensure financial stability.
“With the longer payment terms, SMEs should look to alternative financing solutions to bridge cash flow gaps. Sectors experiencing extended payment terms may also face heightened credit risks. Impacting overall business stability.”
“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. This 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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