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Billions owing as suppliers left in the red

stocks4Mid-sized Australian businesses owe $8 billion in outstanding payments to suppliers, with over $2 billion currently overdue, according to new research released by American Express.

A culture of delayed or late payments of suppliers is significantly more prevalent in the retail sector compared with other industries, according to the survey of 355 CFOs mid-sized businesses across Australia ($2m-$300m), with 38 per cent of retail respondents unable to reconcile their invoices at least every month, compared with 30 per cent of all mid-sized business respondents.

Retailers made up 16 per cent of the total survey respondents. At present, mid-sized retailers owe on average $100k in outstanding supplier payments, with 21 per cent of this overdue.

“There is no doubt that suppliers rely on timely payment, with many going as far as to offer financial incentives for early payment,” said Martin Seward, ‎vice president for small & medium enterprises at American Express Australia.

“More than half (55 per cent) of mid-sized retailers last year secured early supplier payment discounts, at an average total value of $43k last year leaving them open to extra cash flow to reinvest back into the business for research and development or something as simple as staff recognition programs,” he said.

Seward also said that the issue of delayed or late payments could be costing mid-sized Australian businesses billions of dollars every year.

The research comes as a nationwide inquiry commissioned by The Australian Small Business and Family Enterprise Ombudsman is due to release recommendations on possible solutions aimed at resolving the ongoing issue of late-payments for small and mid-sized businesses.

American Express commissioned the research, which was undertaken by RFi Group in October 2016 with 355 chief financial officers in mid-sized businesses in Australia with annual revenue values between $2 million and $300 million.

Almost all retail CFOs surveyed said they would value the opportunity to pay suppliers on time however, cash flow pressures were cited as a key factor when deciding how to pay suppliers. Given the opportunity to extend cash flow for up to 50 days, nearly one in four retail respondents (39 per cent) said they would prioritise faster payment of suppliers

“Despite a positive outlook for mid-sized organisations, with 65 per cent of businesses forecasting growth in 2017, cash flow pressures still constrain mid-sized businesses from achieving their full growth potential,” said Seward.

This article was originally published on Inside Retail AU.

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