Late payments still a problem for SMEs

Late payments still a problem for SMEs | Insurance Business

Late payments still a problem for SMEs

For many SMEs, late payments and bad debts can cause serious problems – and even risk putting a business under – however, it seems Australia is getting better with settling on time.

According to illion’s most recent Trade Late Payments Report, late payments across the nation have improved by 8% year-on-year – taking the delay down from 11 days to 10 days.

However, while the positive shift reflects improved trading conditions and pressure from the government to cut payment times, there were some sectors which bucked the trend.

In fact, payment times deteriorated by 25% in the agriculture sector, and by 7% in both the fishing and communication industries.

“While an improvement in late payment times across the board is encouraging, our analysis clearly confirms the difficult conditions facing Australian farmers, particularly in the face of the ongoing drought,” said illion CEO Simon Bligh.

While illion’s research showed a notable improvement in payments, Mark Hoppe – MD of trade credit insurer Atradius – said he was surprised by some of the results.

“The overall improvement in certain sectors was surprising,” he told Insurance Business. “Atradius’s data, which is based on our clients’ reporting, indicates a slowdown in sectors such as food services and construction. This has led to a record number of claims and overdue accounts.”

Hoppe added that there are currently a number of sectors which underutilise trade credit insurance – including the services sector and SMEs – but could significantly benefit from coverage.

“There is a common misconception that trade credit insurance is expensive or only for large companies that sell products,” he said. “However, premiums are available for a small, fixed cost that most small businesses can readily afford, especially when compared to the potential cost of non-payment by a customer.”

Hoppe also added that, by taking out trade credit insurance to protect themselves while the business is growing, organisations can leverage opportunities more confidently and even move into new markets without being unduly worried about risk.

“Therefore, these businesses could benefit not only from having their unpaid debts covered by insurance, but also from the increased growth they may be able to achieve as a result of not having to proceed with so much caution that their business growth is stymied,” said Hoppe. “The peace of mind and confidence that trade credit insurance can provide is, therefore, invaluable.”