Access to working capital and cash flow is key to the sustainability and growth of Small, Medium and Micro Enterprises (SMMEs). It is necessary for daily operations, taxes, buying inventory, paying employees, and operating costs. It is thus critical for these businesses to obtain payment from suppliers within the agreed terms of payment.
According to research compiled by Xero, 91% of small businesses are currently owed money outside their terms of payment. Overdue invoices are paid, on average, 18 days late in any given month. A further 47% listed cash flow and late payments as the main obstacle to their business growth and aspiration.
For smaller companies with less than 10 employees, the average of late payments due was R93 000 compared to larger companies with 100-250 employees that only average R114 000. As a result, SMMEs are unable to pay or recruit employees, suppliers, and other critical services to run their business. This late payment culture has unfortunately had a negative impact to the growth and sustainability of SMMEs with some resulting in complete bankruptcy.
“Small businesses rely on a regular cash flow to pay wages, promote their products and services, and invest. If the flow stops for more than 30 days, it can mean that the business fails and with it, more people become unemployed” said Geoff Jacobs, President of the Cape Chamber of Commerce and Industry.
There needs to be a collaborated effort to improve ethical standards within corporates and government entities. New innovations, such as accounting software and implementation of digital platforms are vital to further improve the current late payment culture.
Did You Know?
To address late payment challenges faced by SMMEs, Black Umbrellas has launched the BU Payment Accelerator platform. This is a licensed automated Patented Electronic Invoice Validation System that enables buyers to validate Supplier invoices as due and payable on due date. Suppliers usually receive up to 80% of the validated invoice amount (determined by the Financier) usually within 24 hours of validation. The 20% unpaid reserve is paid to the Supplier upon receipt of payment from the Buyer.
This licenced platform is hosted by BankservAfrica, a clearing house of the big four banks and the six smaller banks in Africa.
The full BLSA: Ethics and paying business on time article can be accessed here:
The State of Late Payments in South Africa Forging a positive payment culture with new technology report can be accessed here: