Cash crunch leads small businesses to pay staff late


Over the last two years, several reports into the nation’s payment practices have revealed smaller operators are chasing invoices over periods as long as 120 days from the time they completed work.

A March report by Australian Small Business and Family Enterprise Ombudsman Kate Carnell found “there is a persistent trend in Australia of payment times being extended beyond usual industry standards”.

Flying close to the wind

Partner at insolvency firm Jirsch Sutherland Trent Devine says once a business is facing a situation of being unable to pay their workers on time, it’s “it’s probably nearing the end for the business”.

“I think that would be the final straw — you’re going to cop pressures from staff,” he said.

Mr Devine says delayed payment times are having a significant impact on cashflow for smaller operators particularly in the retail, construction and transport fields.

When businesses don’t have a “good spread of work” or are relying on only one major client, a delay in payments can have significant flow-on effects.

Jirsch Sutherland partner Trent Devine.

“Usually they’ve put all their eggs in one basket,” he said.

Intuit’s research estimates Australian businesses are losing $5.8 billion a year, based on the number of companies that say they abandon projects because they do not have the cashflow to see them through.

One third of companies are waiting on $20,000 of oustanding payments to clear.

Loading

Director at Workplace Law Athena Koelmeyer says businesses can fall into a position where it’s tempting to delay either super payments or the normal pay cycle of wages.

However, there is a risk that a company may fall foul of its obligations under their employees’ award, or at the very least see staff leave the business as a result.

“If you find yourself in a delicate situation, clearly pay your staff as quickly as you can,” Ms Koelmeyer said.

“The consequence of not paying workers on time from a practical perspective is employees may go, ‘We’re not coming in to work’.”

Follow MySmallBusiness on Twitter, Facebook and LinkedIn.

Emma is the small business reporter for The Age and Sydney Morning Herald based in Melbourne.

Most Viewed in Business

Loading





Business

Related posts

Make a comment