Australian Ombudsman for the Australian Small Business and Family Enterprise Kate Carnell is finding that small and medium sized businesses have small bargaining power when negotiating payments from larger businesses.
There is evidence that small businesses send out their invoices late, do not negotiate upfront payments and often receive the payments as late as 60 days. This creates problems with small businesses cash flow. The withheld cash is often used by large businesses to finance their operations. Large businesses also use their negotiating powers to shorten the time in which they are getting paid. Part of the problem is that every small business in Australia is owed about $13,000 at any given time. This number accumulates to $26 billion nation wide.
One of the solutions to this problem is using electronic payment options. Tools like PayPal and QuickBooks shorten the time in which business get paid. Significant help of electronic payment option rests in fast issuing of the invoice, clear and easy to read invoice, discounts for quicker payments, easier tracking of invoices, and partnering with third-party partner.
Finding a solution for small and medium businesses in getting paid on time will result in better service to customer and electronic payment options are helpful.
Key Takeaways:
- Cash flow problems for small businesses can be caused by big banks and slow payment times
- Electronic invoicing through 3rd party software by small businesses can help speed up payment
- Partnering with 3rd party payment companies can also help speed up the payment timeline
“The survey showed our respondents were owed an average of $13,000 at any given time.”
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