Is your cash flow crisis stopping you paying wages?
Do you ever struggle to pay your wages because you’re waiting for your customers to pay their bills?
You’re not alone.
According to a new report from The Invoice Market, 31 per cent of Australian small- to medium-sized-business owners say their customers’ tardiness in paying their invoices is affecting their ability to pay their own employees.
The Invoice Market surveyed 800 Australian SMEs with a normal annual gross revenue of less than $10 million for their “SME Cash Flow Crisis Report”, released in January.
It also found that 49 per cent of Australian SMEs were waiting to be paid by customers before they could pay their own suppliers, and more than 23 per cent experienced cash flow problems that actually stopped them from being able to employ more staff. So it’s no surprise that when asked if their outstanding invoices and cash flow situation increased their stress levels, 47 per cent of those surveyed said yes.
The industries most affected by this are not insignificant, either. Some 57 per cent of mining industry companies interviewed said cash flow was hindering their ability to pay their staff. In the accounting industry the figure was 51 per cent and it was 43 per cent in construction, 43 per cent in IT and technical services, 40 per cent in hospitality and tourism and 34 per cent in real estate.
Have a strategy in place to stop a cash flow crisis
Worryingly, 46 per cent of all businesses surveyed did not have a strategy in place to deal with late payments. Nearly one-fifth (18 per cent) use invoice funding, 13 per cent use credit insurance, eight per cent use a bank loan, and — most troubling — 11 per cent dip into their personal finances. Yet a cash flow crisis is, according to the Australian Bureau of Statistics, one of the key reasons half of all companies go out of business within their first three years of operation.
Not being able to pay your staff can get ugly, fast. Unlike your creditors, you can’t renegotiate the payment terms. Unions and authorities can get involved and you can find yourself featured in embarrassing stories in the media — and that’s on top of the stress, pain and embarrassment you’ll already have experienced before things get to that point.
Don’t let it happen to you. Put a system in place to ensure you stay on top of your cash flow and always have enough money to pay your staff.
Reep can help you there. With live access to your financial data, Reep is a software that creates cash flow forecasts updated in real time — meaning you will always be able to keep a close eye on your cash flow.