Mid-Sized Aussie Businesses Leave Suppliers $8 Billion In The Red

27-Mar-2017 3:00 AM

Mid-sized Australian businesses owe $8 billion in outstanding payments to suppliers, with more than $2 billion currently overdue, according to new research released by American Express today.

The survey of 355 CFOs revealed that the issue of delayed or late payment to suppliers is endemic within the sector, with mid-sized businesses unable to reconcile almost one third (30%) their supplier invoices at least every other month.

This research comes as a nationwide inquiry commissioned by The Australian Small Business and Family Enterprise Ombudsman is due to release recommendations on how to resolve the ongoing issue of late-payments for small and mid-sized businesses.  

It is widely acknowledged that outstanding payments can cause significant cash flow problems for suppliers, many of whom are small or mid-sized businesses, and leave them unable to balance monthly income with outgoings.

Martin Seward, ‎Vice President for Small & Medium Enterprises at American Express Australia said that the issue of delayed or late payments was not only impacting suppliers, but could also be costing mid-sized Australian businesses billions of dollars every year.

“There is no doubt that suppliers rely on timely payment, with many going as far as to offer financial incentives for early payment,” Mr Seward said.

“In fact, more than half (54%) of Australian mid-sized businesses unlocked $1.84billion in savings last year through negotiating early payment discounts with their suppliers, leaving them open to extra cash flow to reinvest back into the business for research and development or something as simple as staff recognition programs.

“It’s encouraging to see that businesses and their suppliers can both benefit from preferential payment arrangements, but concerning that not all Australian mid-sized businesses recognise the value of timely payment – both to their suppliers and their own business.”

Almost all (93%) CFOs surveyed said they would value the opportunity to pay suppliers on time however, cash flow pressures were cited as the number one reason for payment hold-ups. When given the opportunity to extend cash flow for up to 50 days, nearly one third of CFOs (30%) said they would prioritise early payment of suppliers.

“We have seen CFOs who deploy credit as part of their cash flow management toolbox and benefited from the flexibility to pay suppliers early, while keeping capital in their business for longer. Using credit can also offer other benefits, such as reward schemes” Mr Seward said.    

“Despite a positive outlook for mid-sized organisations, with 65% of businesses forecasting growth in 2017, cash flow pressures still constrain mid-sized businesses from achieving their full growth potential. In an increasingly competitive economy, today’s CFO will not want to miss out on opportunities offered by effective and efficient cash flow management.”

 

- Ends –

 

Additional Research Findings

  • Early payment of suppliers is a key hallmark of successful businesses, with the majority (77%) of high-growth businesses securing early supplier payment discounts.
  • CFOs said the additional working capital saved through early payment discounts can be transformational for their business, with almost half redirecting savings towards team training (44%), and new products and equipment (44%), and one-in-five CFOs reinvesting supplier savings into business innovation (21%)
  • Supplier expenses account for one quarter (23%) of a business outgoings; wages is the biggest expenditure, accounting for 39% of all business outgoings
  • Business outgoings are split 65% on domestic payments vs 35% on international payments; cash and credit remain the preferred payment options for domestic payments, whereas only 14% of CFOs use cash for international payments

 

For more information or to organise an interview, please contact:

Simone McDermid from American Express on 0499799136 or simone.mcdermid@aexp.com

 

Notes to editors:

About the Research

This research was commissioned by American Express and undertaken by RFi Group in October 2016 with Chief Financial Officers in mid-sized businesses in Australia with annual revenue values between $2 million and $300 million.   The findings contained in this Special Report reflect the views of 355 Chief Financial Officers (CFOs) in Australia. Respondents included organisations from more than 15 key industries, including construction, manufacturing, wholesale and retail trade, and professional services.

About American Express Global Commercial Payments - Through its Global Commercial Payments division, American Express offers a suite of payment and lending products that help businesses and organisations of all sizes gain financial savings, control and efficiency. Global Commercial Payments provides solutions for travel and everyday business spending, cross border payments, global currency solutions, and business financing.  To learn more about Global Commercial Payments visit https://business.americanexpress.com/au  

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