The flow on effect of late invoice payments is pushing almost a quarter of small business owners to delay paying themselves, fresh research from Xero shows.
Accounting software platform Xero recently surveyed more than 1000 small businesses and sole traders across the country to find out how they tackle invoice management. Of those respondents, 24% said they delay payments to themselves, while 23% delay paying their own creditors or suppliers because their customers pay them late.
Joseph Lyons, managing director of Xero Australia, said the survey results show delays in invoice payments have a knock-on effect that’s felt among the broader small business community.
“It affects their ability to pay their suppliers who are often small businesses themselves,” Lyons said.
Small businesses are commonly paid late, with 63% of small businesses surveyed saying their customers are often behind on payments, causing stress for 35% of respondents.
Asked how much time they spend managing their invoices each month, small business owners said it took them an average of 12.4 hours.
The Cloud-based software provider carried out the survey to understand invoice pain points and levels of understanding of e-invoicing among small business owners.
“[E-invoicing] has the potential to facilitate faster payment times, help to boost cash flow and reduce stress for small business owners,” Lyons said.
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According to Xero, there is a misconception among many small business owners that e-invoicing involves using PDFs.
In fact, nearly half of Xero’s survey respondents incorrectly defined e-invoicing as sending a PDF or link to the invoice via email, when e-invoicing actually involves sending invoices through accounting software.
Based on Xero’s research, the uptake of e-invoicing by small business owners is set to rapidly increase in the near future.
More than 47% of respondents said they know of e-invoicing but have not used it, and would be more likely to adopt it if they received free training or a grant.
The federal government is playing a key role in driving the transition to e-invoicing, after it mandated federal agencies to use digital invoicing systems by July 2022.
Lyons says digitising an invoicing system has “huge potential” for small businesses and should be taken on board by any business or organisation that uses invoices.
“It’s crucial that both government and big business play their role in enabling this to occur,” he said.