Take the pain out of late payments

04 / 10 / 2022

Subscription billing or recurring payment options are fast becoming the preferred choice in many industries to tackle late payments.

4 min.

Australians pay invoices 26.4 days past due on average

Australia is famous for many things; Bondi Beach, Vegemite, Kangaroos and Koalas. But in the business world, Australia has the dubious distinction of being known to be one of the slowest to pay outstanding invoices.

According to 2016 research MarketInvoice (now MarketFinance), a UK based company that lends to businesses based on the value of its outstanding invoices, Australian invoices were paid on average 26.4 days past the due date. That’s just not cricket.

And while we’re sure in years that have passed, Australia has upped its invoice payment game, the repercussions of late payments to businesses cannot be underestimated.

Late payments have a butterfly effect for small businesses. When a customer pays late, this impacts a business’s ability to pay wages, stock purchases and pay business related costs. Furthermore, the time and resources chasing late payments can put significant stress on already stretched finances. 

5 effects late payments have on businesses:

1. Adds financial and administrative costs in chasing payments

2. Impacts employee confidence when wages are not paid ontime

3. Affects supplier relations

4. Limits ability to be competitive in the market, as costs need to be absorbed by the business or passed to consumers via price increases

5. Fuels business uncertainty – leading to potential difficulties securing services with favourable rates

6. Causes undue stress and sleepless nights for business owners

In fact, a paper from Dun & Bradstreet estimates poor cashflow accounts for 90% of small businesses failing. Part of the reason for this is that small businesses are sometimes unable to chase payments effectively as they fear jeopardising relationships with key suppliers. Businesses may then choose to change their operations to account for late payments, which is not a sustainable practice.

What can businesses do to improve cashflow?

1. Where possible, negotiate better payment terms with suppliers. While 30-days may be the standard, it doesn’t have to be. Through shorter payment terms, businesses can plan their cashflow better and even allow for the odd late payment here or there.

2. Invoice at project milestones. By doing this, businesses can get up to 75% of their invoices in advance with the balance paid upon receipt of the final product or service. This will allow businesses to keep cash flowing internally and float less debt to pay staff wages, bills etc.

3. Give your customers more ways to pay. If your business had a payment gateway and virtual terminal set up, you could provide your customers a unique URL on your invoice where they can click on the link and enter in their business credit card details to pay your invoice.  This can be much less effort for your customer compared to bank transfers or other forms of payment.

4. Listen to your customers. If they prefer to pay in different ways (such as credit cards, direct transfer, installment plans, subscriptions, or digital wallets), facilitating these methods with the right payment solutions, will reduce the barrier to them making timely payments to your business. With many businesses having credit cards that accrue points, this can be a great reason to provide services allowing them to benefit from timely payments.

5. Introduce different pricing strategies. Subscriptions are very popular for consumers to pay for services, especially repeated services. So, if you traditionally invoice after services rendered, perhaps you can re-think how you charge for your services and get people to commit to a monthly subscription? This may allow your business to generate stable and predictable income.

6. Paying over time. Installment plans are a great way for businesses and consumers alike to spread costs across multiple payments, so they can manage their cashflow effectively. 35% of shoppers said they are more likely to make a purchase if a business offers monthly installment payments[1]. Setting up your payment gateway to support installment plans, is a great way to offer another alternative to your customers.

7. Invoice asap. It seems obvious, but sometimes businesses are too busy being busy, to invoice customers. By having processes in place that ensure invoices are issued at the earliest point, it limits some of the potential for payment delays.

ANZ eGate is a versatile payment gateway that unlocks new methods for your business to take payments from customers, by setting up recurring payment schedules or subscription pricing options or accepting credit card payments for invoicing processes. ANZ eGate could be the perfect payment solution to help your business rethink how you take payments from customers and keep your cash flowing.

For more information on ANZ eGate and how we can help your business navigate payment pain points, click here.

ANZ Worldline Payment Solutions means Worldline Australia Pty Ltd ACN 645 073 034 (“Worldline”), a provider of merchant solutions. Worldline is not an authorised deposit taking institution (ADI) and entry into any agreement with Worldline is neither a deposit nor liability of Australia and New Zealand Banking Group Limited ACN 005 357 522 (“ANZ”) or any of its related bodies corporate (together “ANZ Group”). Neither ANZ nor any other member of the ANZ Group stands behind or guarantees Worldline.