Late payments are the biggest challenge to small businesses in South Africa, with companies spending on average 1.3 days per month chasing overdue payments, according to research by cloud accounting software provider Xero.
Xero’s research found 48 per cent of South African small business owners report overdue invoices and resulting cash flow issues are their biggest worry.
On average, small businesses spend 1.3 days per month chasing invoices, and the average invoice is paid 10 days late.
The research also looks at the effects of late payments. 32 per cent of respondents said they had suffered cash flow issues as a result of late payments; 18 per cent said they caused reduced morale; and 16 per cent felt that late payments result in reduced productivity.
“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,” said Gary Turner, managing director for the Europe, Middle East and Africa (EMEA) region at Xero.
“The issue of late payments should be given more prominence, with more education needed on how business owners can improve cash flow.”
Considering the main factors causing late payments, 24 per cent of respondents said they believed customers were waiting for payments themselves; 23 per cent believed customers are disorganised and can’t track their payables; and a further 23 per cent said customers set their own internal payment terms for paying invoices, regardless of supplier terms.
In response to the research, Xero announced the launch of the chasing payments platform, which aims to provide advice, tips and tools on improving cash flow, and ways to end problems associated with late payments.