Businesses across Australia continue to contend with the ongoing cost of living crunch, which is causing declining consumer demand, cashflow issues and late customer payments. However, half of Australian businesses admit to avoiding awkward money conversations with their customers altogether; GoCardless, the bank payments company, has revealed.
Within its new ‘Pursuing Payments‘ report, GoCardless highlights the extent of the impact of the cost of living crunch on the cashflow security of small and medium businesses (SMBs) in Australia.
The fintech surveyed 515 Australian SMB owners and primary decision-makers in the private sector, revealing that 55 per cent of business leaders are worried about the number of late-paying customers increasing in the next 12 months.
The fact that half of respondents avoid awkward money conversations with their customers, highlights the seriousness of the issue. Meanwhile, 86 per cent who have avoided money conversations with customers in the past 12 months say there has been some impact from avoiding such conversations. In fact, 19 per cent estimate their business loses between $6,000 and $30,000 from late payments annually.
The data reveals a gender gap in payment confidence, with 29 per cent of women agreeing they’d feel uncomfortable asking customers for payment, this rises to almost half (46 per cent) when it comes to chasing late payments. However, only 26 per cent of men feel uncomfortable asking for payments and 40 per cent share this experience chasing payments.
A generational gap also appears to exist in this regard. Millennials are more than twice as likely as Baby Boomers to agree that they’d feel uncomfortable asking customers for Payment (42 per cent compared to 20 per cent).
What solutions exist for SMEs?
Luke Fossett, general manager at GoCardless, discussed how businesses in Australia should react: “Despite some optimism emerging late payments will continue to cause a cashflow crunch for already struggling SMBs in 2024 – businesses need to acknowledge this and adapt quickly to stay on top.
“For those wishing to avoid more uncomfortable money conversations, there are practical solutions, such as avoiding payment options with high failure rates, automating follow-ups on unpaid invoices and offering payment methods that reduce the onus on your customers such as Direct Debit or PayTo, which automatically pull money from a customer’s bank account.
“For recurring payments, all they need to do is set up the payment once and then forget about it.”
GoCardless’ survey also revealed the factors making businesses more likely to begin a conversation about late payments than last year:
- Operating costs for businesses rising making payments more urgent (55 per cent)
- Realising customers weren’t put off by the conversation (44 per cent)
- Being fed up with not receiving what they were owed (34 per cent)
Jonathan Quieros, owner of Melbourne-based Dukes Gym and a GoCardless customer, revealed he was surprised that 62 per cent of his fellow Millennials in Australia are uncomfortable chasing late payments: “I think it comes with experience. If you’re being clear and transparent with what you’re doing, then it’s not rude. It’s just like you wouldn’t go to a restaurant, eat the food and then be surprised when you’re asked to pay.”
“I think the reason that I feel like that is our charges are transparent, upfront, clear, and easy to understand from the very start. We try and make it so there are no options for misconceptions or misunderstandings.”
