Cashflow is something that any business worries about, but for South African SMEs it could be an even more significant consideration. This as the latest report from Xero says local SMEs are owed on average R99 800 in late payments at any given time.
With many SMEs operating month to month, waiting on such large sums of money could have detrimental effects. Considering that there are an estimated 2.5 million SMEs in the country, that equates to roughly R249.5 billion in late payments.
These numbers were compiled in Xero’s State of Late Payments report for SA, where business decision makers from across the country were surveyed about this issue. The report adds that small to medium enterprises spend on average 89.5 working hours chasing up on late payments, which is equivalent to two weeks.
As such the issue of late payments is not only having an effect on the bottom line of the business, but also on any plans or desires to place those unused funds and time towards more important endeavours.
“It’s not right, or fair that SMEs have to deal with late payments. They live or die by their cash flow – and if they’re not paid, they can’t survive. Just think what they could do with an extra R99,800, it could contribute towards a salary or pay for some new technology,” Xero CEO , Colin Timmis, points out.
He adds that the country’s National Development Plan wants to create 11 million new jobs over the next decade, with SMEs earmarked to provide 90 percent on that. Given how local organisations are struggling to get paid on time and keep the lights on, such a plan from the NDP gets put into jeopardy.
In an ideal world where SMEs are paid more regularly, 30 percent said they would use it to address outstanding debt. 30 percent noted that they would increase head counts or salaries, and 29 percent would invest in new business technology. It’s the latter two which give cause for optimism, and show that local organisations have an appetite to contribute positively to the country.
“It’s really positive to see that SMEs want to invest in new tech and growing their teams. But for this to happen, we need a collective effort to tackle this culture of late payments. There are some actions SMEs can take now to help reduce the burden; make sure you invoice early, use cloud accounting software to send automated payment reminders, and lean on your accounting partners for advice,” concludes Timmis.
The big question now, is how to tackle the growing problem of late payments, especially if South African SMEs are to contribute as needed.[Image – CC 0 Pixabay]