Data from CreditorWatch’s Business Risk Index indicates that late payments have reached their highest rate since March 2021 as overdue business-to-business payments continue to rise.

Insolvencies have increased by 57% in the last year while the average business failure rate across all sectors is at 5.1% and is projected to rise to 5.6%. Industries such as construction, manufacturing, transport and wholesale trade are 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 small and medium enterprises (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.”

SMEs supplying to those industries are often some of the longest payment terms ranging from 30 to 90 days or more. Larger businesses are extending their payment terms which leave smaller suppliers in financially vulnerable positions. The Australian Government has introduced mandated payment terms for large businesses and government entities to support SMEs.

“As economic uncertainty continues, it’s more important than ever for SMEs to take proactive steps to manage working capital while advocating for fairer payment practices,” Nick says.

“The data highlights the need for improved payment discipline across industries, ensuring SMEs are paid on time to support sustainable business growth.”