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Late payments represent biggest challenge for half of South African SMEs

New research reveals the effect of late payments on South Africa’s SMEs, as 48% worry most about overdue invoices and cash flow. Getting paid on time is the number one financial challenge for half of South Africa’s small business owners, according to new research from leading cloud accounting software provider, Xero.

Small business owners spend a whole 1.3 days per month chasing invoices, with the average invoice paid 10 days late. The worst affected sector is Healthcare, where businesses spend 2.6 days a month chasing invoices, followed by Manufacturing & Utilities and Architecture, Engineering and Building at 1.5 days each. Port Elizabeth businesses are the worst off (1.5 days), ahead of those based in Johannesburg (1.1 days).

The research also reveals that:

  • Late payments have caused cash flow issues for 32% of respondents, whilst 18% blame them for reduced morale and 16% felt that late payments result in reduced productivity.
  • The main factors believed to be responsible for late payments include the fact that customers are waiting for payments themselves (24%), customers are disorganised and can’t track their payables (23%) or that customers have set their own internal payment terms for paying invoices, regardless of supplier terms (23%).

Commenting on the results, Marnus Broodryk, CEO of The Beancounter and Shark Tank SA investor, says: “Late payments are a big problem for many small businesses. The resulting issues with cash flow can stifle growth, and even put entrepreneurs out of business. South Africa’s small businesses are engines of economic growth, employing around 60% of the country’s workforce and contributing up to 52% of GDP. Xero’s research shows that more needs to be done to boost them if our economy is going to succeed.

“The amount of time wasted chasing invoices is a scandal. Small business owners should also take steps to mitigate the problem and make sure they get paid on time.”

Gary Turner, MD EMEA at Xero, adds: “South Africa’s National Development Plan aims to create 11 million jobs by 2030. Supporting small businesses is key to achieving this but, as our research shows, this will be difficult with the spectre of unpaid invoices and cash flow difficulties hanging over the country’s entrepreneurs. The issue of late payments should be given more prominence, with more education needed on how business owners can improve cash flow.”

To assist South Africa’s small businesses, Xero has launched the platform, with helpful advice, tips and tools that will help improve cash flow and end problems associated with late payments.

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