SMEs Continue to Struggle with Late Payments, Hurting the Construction Industry

Small and medium enterprises (SMEs) across Australia are facing growing challenges as payment delays continue to rise, putting pressure on cash flow and business sustainability according to research from Moneytech and CreditorWatch. 

Late payments have reached their highest rate since March 2021, with overdue B2B payments continuing to rise, particularly in sectors such as construction and hospitality.

GALLERY  

With B2B payment defaults – one of the strongest predictors of insolvency – more than doubling in the past 12 months, the increase in late payments is placing significant cash flow pressure on SMEs, making it harder for them to meet financial commitments and sustain operations.

Industries such as construction, manufacturing, transport and wholesale trade are 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,” Moneytech chief executive Nick McGrath says.

“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.”

Construction is a persistently late payer due to payment structures that often delay contractor payments until project completion which sees subcontractors struggling due to the complex contract structures. 

Similarly, retail and wholesale trade businesses are experiencing extended payment terms, exacerbating cash flow challenges for their suppliers.

SMEs supplying to these industries often endure some of the longest payment terms, ranging from 30 to 90 days or more. 

“For SMEs, these delays mean making difficult decisions about their own financial commitments, which can stifle growth and innovation.” Nick explains.

Image courtesy of Josh Olalde, Unsplash.

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